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When Do Used Cars Drop in Price?

As with anything that’s for sale, the price of a used car can fluctuate. When you buy a pre-owned vehicle—even if the mileage on it is extremely minimal—it’s not going to offer quite the same value as when it was brand new, parked on the showroom floor. Likewise, the used vehicle you’ve been driving for several years may not be worth the same dollar amount as the day you took it home.

When Do Used Cars Depreciate?

The question is, how quickly do cars lose their actual value? What does the depreciation process really entail? Here are a few quick pointers for you.

Depreciation starts immediately. The most valuable cars are the ones that have never been driven—the ones that are still brand new, parked on showroom floors. Once you take the keys and drive a vehicle off the dealership lot, it loses some of its value immediately—around 10 percent. And the depreciation doesn’t stop there. Within a year, the car will have lost an additional 10 percent. By the time five years have passed, a vehicle will have lost around 60 percent of its value.

Once a car goes from new to used status, depreciation starts to be affected by supply and demand. That first-year drop of 20 percent is a law of nature, but when we’re talking about vehicles on the used car market, there are a number of factors that can make value more volatile. Supply and demand in the used car market ultimately determines what a vehicle goes for.

The economic value of a vehicle is not the only thing to think about. While it’s true that the bottom-line value matters, there may be a car that has depreciated in value but still offers great reliability and fuel economy—making it a potentially great investment for you and your family, even if the more objective dollar amount is declining.

You can preserve some of your vehicle’s value simply by taking care of it. Regular oil changes, washing and waxing, new tires—all of these factors can help your car to keep some of its value.

As you shop around for used vehicles, you may have a better chance of getting the bells and whistles you couldn’t afford if the car was brand new. Look around for cars that are loaded with features; that might make them more valuable and more appealing to you, which is half the battle!

Questions When Buying Used Cars

The bottom line: When you’re looking for used cars, there are a lot of questions you should ask yourself to ensure you’re getting the best value. How old is the car? What’s the mileage? How well has it been cared for—inside and out? What kinds of features does it offer? And how will it address the needs of your family?

That’s how you determine value. Come at it from all angles, and find a vehicle that offers you what you really need.