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One thing that nearly every passenger vehicle does well is depreciate (go down in value). The first hundred feet you drive that newly bought car―when you maneuver it off the dealer's lot―you'll shave literally thousands of dollars off its resale value. In fact, in the first four years a car can lose 60 percent of its value on average, according to LendingTree.
For a number of reasons, different cars depreciate more than others―and before you buy, it's good to have an idea of where your car will stand in a few years. If you plan to hold onto your new car for decades, then its resale value probably is less important (who cares if it will be worth $2,000 in 15 years or only $1,500?).
But if you expect to replace your wheels in three to five years, then you'll want to be able to get good money out of it when you sell. This is true even if you leased the car: If the residual value winds up being higher than the manufacturer predicted when you leased the vehicle, then you can actually make money by keeping or selling the car rather than returning it at the end of the term.
What Affects the Value
How your car performed historically on the used market is a helpful indicator of how it will do in the future. Kelley Blue Book and the National Automobile Dealers Association both calculate what your car is worth on the used car market right now. These sites also offer car reviews that usually comment on the model's typical performance on the used market.
Certain cars are extremely popular, reliable, and relatively cheap to buy and fix―Hondas and Toyotas are good examples. They have a reputation for holding their value well, and they're easy to sell. Buying a car with popular options is also a good move to preserve its market worth; most drivers prefer automatic transmissions and air conditioning, for example.
What about buying a used car and then selling it again (would that be its resale resale value?)? That's where more highly engineered and solidly built cars like BMWs (which also historically maintain their value well) stand out. Cars that last longer will be worth more the second time they are resold than more lightweight cars that wear out or shake themselves loose over the course of a decade. And mainstream midrange models are a safer bet than unusual, exotic, or very expensive choices. Make sure you buy it used at the right price by first checking out the market prices online.
How to "Buy Well"
Surely, you're thinking, someone has compiled used car pricing data and generated a list of those whose prices stand the test of time. But of course.
If you're on the market for a new vehicle and are concerned about your investment holding its value, consider Edmunds' best vehicle lists.
How does the price of a new car affect its resale value? On the one hand, if you buy a car for a steal, you'd think the resale price would be closer to what you bought it for than if you paid a premium. But this isn't always the way it works. There are factors that allowed that car to be available for such a bargain in the first place, and these can similarly affect the resale price.
When the prices of new cars go down in a certain model year, that can be good, but the economics dictate that the resale value will probably be less, too. And when you see cars from a particular vendor being sold with huge rebates or other incentives, this can indicate that the automaker is having a hard time unloading that model―also probably reflecting a lower resale value. Some analysts suggest that you can simply subtract the rebate amount from what you'll be able to sell the car for later, canceling out any benefit.
Tips for Preserving the Value
Buying well only helps you later if you take care of the car. Adopting or avoiding the following habits will help you keep the resale value afloat.
- Wash your car regularly, inside and out. Dirt will abrade paint and fray fabric, and rain mixed with pollutants can etch your finish.
- Park in the shade to prevent oxidation of the plastics, including the dashboard and exterior trim.
- Park as far away from other cars as possible to prevent dings from their doors. Fix any dings you do get so they don't turn into rust spots.
- Keep all maintenance records, even routine oil changes. A thick stack of records shows a buyer that you took good car of the car.
- Use protective products regularly on the interior and exterior. Like sunscreen, this will keep your vehicle looking younger over the course of many years.
- Smoke in the car. Burns in the seats and that eternal cigarette smell are a turnoff.
- Eat in the car. Food stains and unreachable crumbs between your seats―yuck.
- Choose an unusual paint color. What's trendy now might look sadly dated in a few years.
- Customize the interior or exterior in wacky ways. Getting a better stereo is probably OK; gutting your dash to make room for it is probably not.
- Neglect oil changes. Regular oil changes are good for the longevity of your engine, and buyers want a car that still runs well, not just one that still looks good.
- Auto Resale Value Advice, from LendingTree
- How Price Affects Resale Value, from AutoTrader.com
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