11 March 2019

Understanding the Impact of Vehicle Depreciation

Are you currently in the market for a new vehicle? It’s important to understand how the depreciation of a vehicle should play an important role in your decision-making process.

What is depreciation? Basically, it’s the difference between the price of a vehicle upon purchase and its resale value.

The popular saying that a new car loses nearly half of its value when it leaves the dealership is close to reality. According to CAA, a new car loses nearly 30% of its value in the first year. In the following years, we’re looking at a drop of about 10% per year.

This phenomenon is the same regardless of the method of payment. For owners of new cars wishing to resell their vehicle after a few years, losses are astronomical.

According to La Presse, the best option for consumers is to buy a pre-owned car of two or three years, and keep it at least four years.

Indeed, a new car will lose about 15% of its value from its first outing, while for used cars, it will be around 9%, according to a study conducted by Kijiji and reported by Affaires Automobiles.

Still according to the same study, used car buyers would even be winning on their maintenance, insurance, and monthly payments costs, with savings of nearly $114 a month in comparison with new car buyers.

Before buying a car, be sure to evaluate its actual costs. To do this, you can use a calculator, such as CAA‘s, to help you determine the annual costs of a vehicle, including depreciation.