Car Buyers Should Appreciate Depreciation |
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Peter Robinson
9 April 2008
When folks heap praise upon their own brilliant choice of vehicles, sometimes they will point out that the car they drive will run for 400,000 miles. Or 500,000 miles. Or some other number only of interest to employees of the Guinness corporation. The book, not the beer.
While the potential that certain vehicles have to continue to run long after others have been mourned and forgotten is clearly indicative of a superior car, what does it really mean to you? To put it another way, do you care how many miles it runs after you have left it behind? How is that high-school girlfriend of yours doing today? Don't know? Exactly.
The affect of depreciation on a car deal can not and should not be ignored, but crunching numbers for days or weeks will not yield a voila! moment, as each situation is completely unique. We can only decide what is best for our family at the time of purchase, use our best information and instincts to make our decisions, then move on and enjoy the car. A thousand dollars over 60 months is less than twenty bucks a month. Don't let that relatively insignificant amount make you crazy!
One way to get on top of depreciation is to look for cars that have an unfair, unrealistic depreciation rate. A brand like Hyundai, which struggled with quality issues for many years but which has made decent cars for some time now, may not outgrow it's rep for years, so these cars can be good bargains. The Audi A6 is every bit the car that the Mercedes E-Class , the BMW 5-Series, and the Lexus ES are, but there is just a bit less demand, a bit less flash...maybe it can be said that the depreciation rate is often simply the confluence of demand and cachet.
If you are planning to purchase a new car, you are agreeing to being eaten alive by depreciation. Your only defense position is to buy a car that depreciates more slowly than it's competition, assuming they are priced the same to begin with. While many of us intend to drive our vehicles out to the bitter end, very few of us do.
One way to really make depreciation work for you is to buy a vehicle with about 2 ½ to 3 years and 30000 miles on it. After this point, the price will not fall as quickly as it had been, and the vehicle will be beginning to show some signs of aging. And, as it is for all of us, it is all downhill from there!
So...let's be most concerned with the next 40,000 miles, let's buy a car we will love, let's pay the amount we can afford, and then let's celebrate by opening a short Guinness. The beer, not the book!