It is said that the moment you drive your new car off the lot if has lost a good percentage in value. As long as we believe this to be true, it is true. What measurable things have happened to the car in the first 100kms that make it lose so much value? Even a bad driver would be challenged to burn out a clutch in this period of time. Even within the first year, provided maintenance is properly done, the real value of the car does not drop that much. Depreciation is not a straight line as the likelihood of part failure increases with age, but the notion that a one or two year old car has lost 50% of its value is nonsense. People pay a premium to drive a new car, but I feel that the premium is too steep. The initial depreciation on a car serves only the dealers who might have more one year old used models on their lots if it weren't there. What is the real value of a six month old model or even a two or three year old model that has been maintained?
I believe that a car has about a 10-15 year useful life depending on the use. Straight line is the wrong method of depreciating a vehicle though. A more efficient measurement of depreciation for a vehicle is by using the kilometers already traveled. Still, there are a lot of considerations when depreciating car. Say you used a car for 5 years. And on the 6th year, you installed a new timing belt, changed your mugs, and made other modifications. This would definitely increase the value of the car. Oh, and by the way, using the car for one or two years won't decrease its value by 50%. That's just ridiculous.
Log In Actually, from what I read, it seems like a new car losing 40 to 50 percent of its value in two years is a reasonable estimate. However, though, if the vehicle has been damaged beyond an acceptable degree, then it would lose more. Note, unless it's some vehicle that has been in a clean air-conditioned garage, I don't think the vehicle will lose less than 40 percent.
