There is nothing new about this: all cars experience depreciation over time. In fact, depreciation is the most notable negative expense in vehicles, far higher than the combined costs of fuel, maintenance, tax payment, and insurance. Even though your car will lose value over time, there are specific strategies to slow down the impact of inevitable depreciation.
This subject may particularly interest you if you think that, at some point in the future, you may want to use your car as collateral for a loan. If your car has a higher value, then you can receive more money on an auto title loan. Be sure to read this article to know how to keep your value up.
Depreciation is extremely difficult to quantify since not all cars and motorcycles lose value in the same way or at the same speed. Some of the biggest factors that affect the different depreciation ratios we know of are the manufacturer, the make, and the model. These are things that can only be controlled in the buying process. If you are buying used then the age, history, and condition of the vehicle matters when making a decision as well.
You can also use these factors to determine when you ought to sell your car when you are ready to buy a new one. Taking all these factors into account and using the theory of smart buying, you can determine something known as the key selling point meaning the optimal time to get rid of it.
Calculating the optimal time to sell your car before it starts to depreciate can be estimated by following this process to avoid money-loss:
Let’s take a look in more detail now of how following this process helps avoid major depreciation of the vehicle’s value.
On average, new cars lose between 10% and 11% of their market value the moment that they are driven off the dealership’s lot.
Shortly before reaching the one year mark, that same vehicle will lose an additional 10% on average. After that, the value stabilizes for a few years following that 20% drop. Therefore, to minimize the loss of money on your end, you ought to buy the car after it has already experienced that 20% depreciation so you can purchase it for 80% of its original price.
Think about it in dollars. An average new car has a price of $27,660 and loses more than $7,400 of market value in its very first year of use. However, that same car will only lose $6,000 of its market value during the second, third, and fourth consecutive years combined. That is, it has lost $1,400 more in only the first year, then in all the following three years together.
This is the period in which the “key selling point” is reached. There are many advantages to being the owner of a used semi-new vehicle. The car has already suffered the effect of the initial depreciation, which means it can be brought at a lower price. However, this vehicle still has state-of-the-art technological features. Additionally, within that period it is still usual for the car to be guaranteed repairs when if you own an older car you risk costly repairs of breakdowns.
Around the sixth year in the life of a vehicle has the most pronounced drop in value. This drop is labeled the second depreciation. The length of time may vary depending on the vehicle but on average, the car is usually between six and seven years old when this phenomenon happens.
At the end of this period, most vehicles need updates and part changes at the mechanic. For example, at this point, you’ll likely need to replace the tires after six years of use. Taking advantage of this, try to sell your vehicle right before this second depreciation is hit so you can get the highest return to buy another vehicle.
As we mentioned earlier, this technique used to maintain the highest value in your car for as long as possible can be particularly useful if you wish to use your car as collateral for an auto title loan.
Car Title Loans are granted in exchange for a lien being placed on the owner’s vehicle title as a guarantee of repayment. The maximum amount of the loan completely depends on the current market value in the vehicle that you are using as collateral. So, the higher the market value, the higher the amount of money you will get in your loan.