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Car owners should be aware of the car depreciation rates. Car depreciation is the percentage decrease on your car’s real value in a given time affecting its resale value. In order to slow down depreciation, you need to understand every aspect of car depreciation by reading the basic facts below.

1. What is Car Depreciation

Car depreciation is the reduction of the vehicle’s original value. This is usually computed after 36,000 miles or three years of continuous use. In addition to this, the car’s physical appearance and the engine performance also contribute to the decrease in the vehicle’s resale value.

The depreciation rate can be computed using online calculators. This tool uses algorithms to estimate the percentage reduction of the car’s value. Using this tool usually requires you to input information about your car such as its type, the original price, and the year it was built. Online calculators are usually found on sites maintained by car dealers.

1. How does a Car Depreciate?

Cars tend to lose 15 to 20 percent of its value each year. So, a three year-old car’s value is estimated to be around 80 percent of its value when it was just two-years old. For example, you bought the car for $20,000 with an annual depreciation rate of 20%. After the second year, its value is around $16,000. On the third year, the car’s value is estimated to be around $12,800.

1. Car Depreciation is Caused by External Factors

The rate in which the car depreciates each year is caused by several external factors. The most common factors are the effects of the general economy and the trends in the auto market.

The general economy’s status influences the reduction in the car’s real value. When your country’s currency depreciates, it affects the value of your vehicle. The trend in the auto market has direct effects on the car value. When more recent models of cars are introduced in the market, there is a great possibility that the depreciation rate would also increase.

1. Depreciation can be Reduced

Just like any other car problems, depreciation can also be reduced. One way of doing this is by choosing a car orBuy A Car which is considered to be the best in its class. This type of car will still be in demand after a few years. You can actually sell the car in the near future and still enjoy higher profits due to its low depreciation rate.

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Source by Nancy Stewart