Factors That Determine How Much a Car’s Value Depreciates

Becoming an auto-owner in the current market is tough—nearly 80 percent of all new vehicles sold during February 2022 sold over their sticker price! However, it’s the perfect moment to sell your used ride for a pretty penny. In fact, many people are finding that their automobiles have appreciated in value, something that rarely happens.

If you’re looking to add some money to your savings account or you just want to look out for one of your most valuable assets, here are the factors that determine how much a car’s value depreciates.

Age

A vehicle’s value declines over time. As technology advances and consumers look for the newest products, older vehicles begin depreciating at an alarming rate. On average, a year-old vehicle is worth 20 percent less than its original sticker price. After 5 years, that number drops to 60 percent or more.

Therefore, a $100,000 car might be worth $40,000 in half a decade—but there are ways to avoid this drastic drop in value. Taking excellent care of your vehicle slows depreciation, so get regular tune-ups, inspections, and repairs. Avoid accidents as much as possible, and maintain the interior. When it comes time to sell your vehicle, you might make more than you expect.

Mileage

Mileage is a more complicated factor to understand when you’re considering depreciation. Vehicles typically lose $5,000 to $10,000 after the first 3,000 miles. However, the value only dips around 50 cents per mile after that. Obviously, these numbers also rely on the vehicle’s make and model and other outside factors, but a vehicle with 100,000 miles is significantly less valuable than one with 50,000. Couple milage with age, and you can see why vehicles don’t usually appreciate.

Supply

The current state of the automobile industry is in flux due to high demand and low supply. The pandemic continues to cause massive shortages globally, and auto dealers have felt this problem. Crucial parts such as computer components are harder to come by these days, so fewer vehicles are available for sale.

When supply is low, however, used vehicles rise in value. In general, American consumers purchase nearly 40 million used vehicles a year, compared to 14 million new ones. Couple this with worldwide shortages, and your ride has never been more valuable.

Appeal

One factor that’s harder to calculate is the appeal of specific models. Some vehicles are so popular that they successfully sell regardless of age, mileage, or supply. Dependable vehicles such as Hondas and Toyotas are always great options for teens looking for their first rides—they’re appealing to both the young driver and their parents. Pop culture icons such as the Jeep Wrangler are also valued for their cultural significance and highly customizable nature. Automobiles that are no longer produced also hold value on the secondhand market.

Time mainly influences the factors that determine how much a car’s value depreciates—older, oft-used vehicles are worth less than their newer contemporaries. However, other factors such as supply chains and cultural standing play a role in whether your automobile will sell for a lot. Do some research to determine how much your ride is worth, and act quickly when the market is ripe for used vehicles.