The total cost of ownership cars involves more than just the actual cost of the vehicle. After you take into account insurance, maintenance, and other factors, the true cost of ownership becomes more clear. One area of vehicle ownership that’s difficult to understand is depreciation, or the amount of value a vehicle loses over the course of it’s life. This is an important element to know, whether you’ve recently purchased a new vehicle or you want the advantage when negotiating the price of a used vehicle.
Basically, the average new vehicle loses between 15 and 20 percent of its value as soon as you drive it off the lot, and it continues to lose an additional 15 to 20 percent of it’s total value per year. That means that within five years of purchase, a vehicle has lost nearly 100 percent of it’s market value to depreciation. That doesn’t mean that the car is worthless, it’s simply worth less. You can still negotiate a fair sale privately, and certain vehicles, such as trucks and upscale luxury or sports cars, depreciate at a slower rate and will always find a market.
To find the right price to pay for a used car, you have to take certain factors into consideration. One factor is knowing the current resale value of that make and model according to the vehicle’s age and the region of purchase. That should provide a basis for negotiations, along with its accident history and general condition, and put you in the ballpark when making an offer.
