Why Do Cars Depreciate So Fast? (11 Reasons Why)

In the past centuries, cars have come a long way in terms of technology and performance. But, unfortunately, one thing has remained constant over all these years: depreciation.

It is hopeful to think that a car’s value will always stay the same. But the reality is that it depreciates so fast, and you wouldn’t believe how quickly they can go down in value! So here’s what I’m going to tip off about why vehicles lose weight over time!

Why Do Cars Depreciate So Fast?


1. Technology Advancements

Cars depreciate so fast because they’re constantly being upgraded and improved. In addition, the more popular a model becomes, the more expensive it is to modify.

Consequently, it has led to the development of new technologies and materials, making them more dynamic, durable, and energy-efficient.

Because of this, cars are constantly changing. These advancements can lead to a big difference in how much your vehicle costs you over time.

2. Rising Demand

Because of a continuing lack of new cars paired with high consumer demand, dealership earnings are currently through the roof, and so are the prices for these vehicles.

In other words, rising demand in the car industry has caused a significant increase in production volumes and the number of vehicles produced yearly.

While some demands are minor, others are more substantial—like better engines or more efficient transmissions.

Overall, supply and demand cause an effect in the market, and so does decreasing an old car’s value in no time!

3. Accidents And Damages

If you’ve ever seen a car with accident damage, you know how much of a dent it can make in the value of your vehicle.

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Under those circumstances, a vehicle in several accidents will lose its value much faster than one that has not.

This is why the more damage a car has sustained, the more likely it is to be sent back to the dealership. Hence, you will lose even more money in repairs and fees.

Without a doubt, if your vehicle sustains significant deterioration from an accident, it can be worth less than before it was damaged.

4. Gas And Mileage

High mileage is typically only applied to vehicles that have traveled over 100,000 miles.

In most cases, some vehicles don’t have warranty coverage for more than 100,000 miles, but there are some exceptions.

On the other hand, a car’s gas consumption depends on how much you drive it and the type of fuel your vehicle uses.

As an effect, when a car has too many miles, it will cause your vehicle to depreciate faster than usual because it’s no longer as reliable as it used to be.

5. Vehicle Reliability

A car’s value decreases as its reliability goes down. So when you buy a vehicle, how long it will last and how reliable it is plays a crucial role in determining the number on the price tag.

Additionally, if your car’s engine blows up or fails to start when you need it, that could cost you money if you have to replace it with another type of vehicle entirely.

Without a doubt, if your car is prone to breaking down, you will have less incentive and less chance that someone will want to buy it from you at a high price.

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6. Fuel Economy

Fuel Economy

Every year, the majority of manufacturers work to improve fuel efficiency.

Eventually, used cars that consume more gasoline per mile are worth less in comparison as the norm for fuel economy rises.

Therefore, getting a new vehicle is a bad idea just to save gas money.

Above all, gas prices often fluctuate throughout the year, affecting how your vehicle marks its value.

7. Newer Models

Another reason cars depreciate so fast is because newer models are built with better materials and technology than older models.

In addition, people looking to buy secondhand cars choose them based on updated characteristics and features.

Above all, the price of your used car still has room to drop due to the higher starting prices of newly launched vehicle models.

8. Maintenance

Maintenance plays a considerable role in how quickly cars depreciate.

That is why if you don’t take care of your car by changing the oil or giving it regular tune-ups, you will end up with an older car that’s harder to trade in for something better later on down the road.

Undeniably, when your car is old and no longer in its prime years, it will lose its value even faster than usual, especially if it’s not regularly maintained.

9. Car Insurance

Insurance companies employ straight-line depreciation, the most straightforward method for calculating depreciation over time.

Using this procedure, an asset’s value is reduced by the same depreciation amount for each year it is put to use.

By all means, if you drive an older vehicle with a declining value, some coverages, like collision and comprehensive, can be removed to reduce your policy’s rate.

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10. Subprime Auto Loans

People with poor credit ratings or short credit histories might apply for subprime vehicle loans.

Due to the borrower’s perceived greater riskiness, subprime auto loans have higher interest rates than conventional vehicle loans.

Therefore, it’s more likely that you won’t be able to sell your car, or worse, it will lose some of its greater worth if a subprime loan is on top.

11. Consumer Approach

One way to predict how much a car will depreciate over time is consumers’ frame of reference.

Moreover, this technique calculates how long it will take for a vehicle to lose value by using the age and model of the car.

To put it another way, from a buyer’s perspective, if they purchase a used car made in 2020 that has only been slightly used, consumers would think that it will lose the majority of its value within a year.

Conclusion

Cars depreciate because they’re made to be used and discarded after a particular time.

When you look at the history of car technology, you can see that it’s always been vulnerable to technological developments, increasing demand, and fuel reliability.

Ultimately, the older the vehicle, the more this happens, and there’s nothing you can do to stop it.

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