Depreciation: Decrease in value due to wear and tear, decay, decline in price, market conditions, etc.
This word is well represented in the world of pre-owned vehicles. Immediately after taking a vehicle off the new car lot, your “new vehicles” are worth thousands less and continue on a rapid downfall as the days pass and the kilometers accumulate. Virtually all makes and models of vehicles tend to lose 10-20% of their MSRP value immediately once they are driven off the new car lot and continue to depreciate 15-20% on an annual basis of their current value. Those cars that are worth more than half their value after 4 years are considered to hold their value very well (ie. Select models of: Toyota, Honda, Porsche, Ferrari, Lamborghini, Acura, Lexus, Infiniti BMW, Mercedes etc) and those that are worth less than 50% of their value in 3 to 4 years are at the other end of the spectrum. At that point, most of the depreciation damage is done and its at this point when I would strongly recommend the purchasing of a vehicle.
But Tom!!! What about warranty issue and repairs???
Here’s some food for thought. You spend 70000$ (baseline, non optioned, without tax of course!) on your new Cadillac Escalade. If you look on the used car market, say trader.ca, you can find several better equipped 2-3 year old models (Same generation) between 40000-50000, some still under extended warranty with the certified pre-owned programs. Therefore, if owning a brand new vehicle is not a life and death issue, bite the bullet and wait a couple years before buying a specific model and the warranties will still apply. Why not buy a 15000$ award winning and sought after Honda pilot EX-L or Acura MDX? You won’t have to worry about repairs, get better MPG, still have all the looks and utility, wont depreciate much more and have an extra 50000$ in your pocket?? Brand new these SUV’s were 45000 to 50000!! I’m not even saying don’t buy these vehicles, I’m not saying stay away from Escalades and Fords, not at all. I am simply trying to get the point across that buying used is just as safe as buying new in many instances, even several 2 year old vehicles can already be at half their value, regardless of mileage.
This doesn’t just apply to entry level cars, SUV’s, trucks and vans. This rule applies to every single make and model you can think of excluding a handful of exotics. Actually when someone is in the market for a leisurely sports car, people should never purchase a new car unless money is no issue at all. I will explain in detail.
Seriously people, look into used cars, if anything buy a vehicle that is a year or 2 old, it has already depreciated significantly, more than likely has a factory extended warranty or the original still in place for many more years, costs thousands less and can still be financed with slightly higher interest rates. You will be surprised the find some vehicles you once thought were too expensive, are actually cheaper than that dodge avenger you want brand new??? (stupid, stupid, stupid…..)
If you have any questions about any make and model comparisons and used car values, or anything automotive (nothing with repairs please!!) ask me. So back to the title. Your going to pay 50000 For a brand new Ford Mustang GT, granted it’s an amazing car I completely agree, especially a Boss 302 (which is a great buy in my opinion, LS pack especially) however a base GT or…..a 996 turbo/GT3, C6 Z06, Viper SRT-10, 997 Carrera S, Super high milage 997 Turbo even!! All I’m saying is “ignore brand loyalty” and what you “think” you like and actually drive the other cars you can get for the money and then tell yourself which is a better buy. It’s your money, I really don’t care what you do, however you will thank me later assuming you take at least some positive out of this.
Live to Drive!!