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Fighting Depreciation With A Car Loan

Jan 13, 2008
What do you think is the most expensive aspect of owning a new car? You might answer gasoline, insurance, new tires and you would be wrong. The greatest expense to owning a new car is depreciation. Depreciation is the single most expensive part of car ownership. When you are thinking of that new vehicle, when you are thinking of that new car loan, think about depreciation as well.

If you are not sure what depreciation is, it is the difference between what you pay for the vehicle and what you can sell it for later on. The amount of depreciation varies wildly from one vehicle to the next, and it also changes with the mileage on the vehicle.

It is generally considered that for an average, intermediate sized vehicle, depreciation will amount to 32 percent of the total cost of ownership over 128,500 miles. That is the normal life expectancy of a vehicle.

Depreciation becomes an important factor when you are choosing a new car depending on how soon you intend to trade it off for another one. If you are only planning to use the vehicle for a short period of time, a year or two, depreciation will be more important to you. Vehicle depreciation is usually greatest in the first few years of the vehicle's life and then it begins to level off with time.

Mileage and age are just two of the factors that can affect the resale value of your vehicle. Here are some more that you might find interesting.

Some of the options that you add to your vehicle will increase the value of your vehicle when you sell it or trade it in; some options will have no effect on resale value, and other options will actually make it harder to sell your vehicle.

Some of the options that add value of your vehicle are automatic transmission, air conditioning, power steering, and rear window defogger as long as all of these still work properly.

Added options that may interest certain buyers, but not others, include cruise control, sunroof, tilt steering wheel, premium stereo systems.

And then there are those vehicle options that may not be worth their costs when it comes to selling your vehicle later on. These include items such as diesel engines or very large hot rod type engines, expensive aluminum wheel covers, vinyl roofs, and boom box stereos.

When it comes to selling your vehicle, red and beige are the most popular colors that buyers seem to love. Blue, as long as it is not a light tone of blue, also sell well. Wild colors are much harder to sell than "normal" colors.

For the most part, you can get a better price if you sell your vehicle yourself. Many people, however, prefer to trade the vehicle in as part of the new car buying process with the dealer. This can be especially true if the process involves a car loan. While depreciation is a factor to buying a new vehicle, it should not be considered the sole factor in making a decision. It is never a good idea to drive something that you hate simply to get a better price later on.
About the Author
Peter Kenny is a writer for The Thrifty Scot, please visit us at Car Loan and Personal Loan
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