Buying a new car is a thrilling experience. Whether it’s a brand new model with the latest features and gadgets or a “new to you” pre-owned vehicle that ticks all your boxes, it is always exhilarating when the papers are finally signed and you drive your new vehicle off the lot.
As excited as you may be, it is wise to temper your enthusiasm by keeping in mind some practical considerations, including the financial impact of purchasing a car. One important financial consideration when evaluating a vehicle purchase is depreciation. Understanding how depreciation works, what affects it, and how it might impact your purchasing decision can help you make a wiser vehicle investment.
At Mike White Ford in North Idaho, we know purchasing a car is a significant financial investment. We want your car-buying experience to be positive, not just on the day you buy it but for as long as you own it, which means making a decision you are comfortable with. The following information about depreciation should help guide you in making an informed decision in choosing and purchasing your next vehicle.
What Is Vehicle Depreciation?
Depreciation refers to the decrease in market value that a vehicle experiences as it ages. Like it or not, cars are depreciating assets (with rare exceptions). They usually have a fixed life, and wear, tear, and time make them less valuable. New cars lose value the moment they leave the dealership lot, typically dropping 20–30% of their value in the first year alone. Over five years, the average car loses approximately 60% of its original value.
However, not all vehicles depreciate at the same rate. Several factors influence how quickly (or slowly) a car loses value:
- Age: Newer cars depreciate more rapidly, while depreciation slows as the car ages.
- Mileage: The more miles on the odometer, the less a vehicle is typically worth.
- Condition: Well-maintained cars hold their value better than those exhibiting signs of wear and tear, such as dents, marred upholstery, or broken or non-functioning features.
- Reputation and Desirability: Cars with a history of reliability, strong performance, or iconic status retain value better than others.
- Model and Market Trends: Some models, particularly trucks and SUVs, tend to depreciate more slowly because of consistently high demand.
Resources to Understand Vehicle Values
When assessing depreciation or determining a vehicle’s current value, there are several trusted tools you can use:
- Kelley Blue Book (KBB) provides up-to-date vehicle values based on market trends, the specific model and year, and the vehicle’s condition.
- Edmunds: Offers a True Market Value (TMV) tool to help buyers and sellers assess fair pricing based on the condition of a particular car and its geographic location.
- NADA Guides: A resource commonly used by dealerships to evaluate trade-in and resale values.
These resources allow you to research how a specific make and model has historically retained its value, giving you insights when buying a new or used vehicle. You can find out if a particular car you are interested in is being offered at a fair price and whether that model has historically retained much of its value.
Ford Vehicles and Depreciation
Depreciation is an inevitable aspect of vehicle ownership; however, some cars hold their value exceptionally well — and, as noted above, a few even increase in value over time.
The Ford Mustang is a prime example. The Mustang’s striking design, storied history, enduring popularity, and status as a cultural icon contribute to its ability to retain value. Well-maintained classic or special-edition Mustangs can even appreciate, making them an excellent long-term investment — if investment value is one of your prime goals.
Other Ford vehicles, such as the Ford F-150, consistently show strong value retention. As one of the best-selling trucks in America, the F-150’s durability, versatility, and high demand help it depreciate more slowly than many other vehicles in its class.
Similarly, the Ford Bronco has gained a reputation for holding value due to its rugged design, off-road capabilities, and high desirability among enthusiasts.
While depreciation will probably not be the biggest factor in your decision, it should nevertheless be part of your calculus to ensure you get value for your money.
How to Minimize Depreciation Impact
While depreciation is almost unavoidable, there are ways to minimize its impact when buying or owning a vehicle:
1. Buy Used
Purchasing a pre-owned vehicle that is 2–3 years old allows you to avoid the steepest part of the depreciation curve. These cars have already experienced the largest drop in value but often still have many years of reliable service ahead.
2. Choose Vehicles with Strong Resale Value
Do your research to identify models with a reputation for holding value, such as Ford’s trucks, SUVs, or the Mustang. There is a lot of information about the pros and cons of various models online, but be sure that any site you rely on is reputable.
3. Maintain Your Vehicle
Regular maintenance and prompt repairs help keep your car in excellent condition, preserving its resale value. Keep detailed service records to demonstrate the care your vehicle has received.
4. Limit Mileage
Staying below average annual mileage (around 12,000 miles per year) can help your vehicle retain more value over time.
5. Consider Market Trends
High-demand vehicles, like fuel-efficient models or vehicles with off-road capabilities, tend to depreciate less rapidly. Consider how current market preferences might affect long-term value.
Visit Mike White Ford When You’re Ready for Your Next Vehicle
Whether you’re looking for a new car or a reliable used one, Mike White Ford can help you find a vehicle that fits your needs and budget. From muscle cars to trucks to SUVs and more, we have options to suit every lifestyle. Contact us today or stop by one of our showrooms in Coeur d’Alene or Sandpoint to explore our inventory and speak with a member of our knowledgeable team. Let us help you make a wise investment in your next vehicle!