Published on October 12, 2016
he minute you drive off with a new car, it begins to lose value. All cars depreciate at a different rate. It’s important to understand your vehicle’s rate of depreciation before you sign any papers. A new car loses 11% of its value the moment you leave the lot.
During the first 5 years, it depreciates by 15-20% each year. After 5 years, that vehicle is worth 37% of what you initially paid. You can use a tool to figure out which car depreciates at what rate, but let’s take an example:
- Let’s say you want to purchase a new Nissan 370z at the original current market price of $29,873. Here, you stand at 100% true market value (TMV) and have 0 miles on the odometer.
- Just one minute later, you car has already lost $2,559 in market value. You stand at 91% TMV, and the price tag has already dropped to $27,314, and the odometer reads 000001.
- Fast-forward one year: 015000 on the odometer, your car’s TMV already depreciated $5,687 in that year. You stand at 81% TMV and your car’s value is now at $24,186.
- After 2 years, your car’s TMV stands at 69%, your car’s value lost $3,607 that year and the price tag sits at $20,579, with 030000.
- After 3 years, your car’s TMV stands at 58% and by the end of the third year, your car lost $3,173 in value, your odometer stands at 045000 and your car is now worth $17,406.
- At year 4, your TMV is 49%, and your car has lost $2,813 for that year. Approximately 060000 sits on your meter, and your car is now worth $14,593.
- Finally, year 5 after your initial purchase, you lose a total of $2,524 for that year. You stand at 40% TMV and your car’s new value is $12,069.
- At the end of the five years, your total depreciation sums up to $17,804, so you vehicle has depreciated by 60%.
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