The automobile industry, like any other industry, has its fundamental and guiding principles. Given the fact that the advancements in science and technology have been happening recently, this industry has been impacted by innovations as well. The expansion of the Internet changed the industry entirely, but the technological changes have also left a mark on the automobile market.
It seems that everything around us changes drastically. If we were to compare the difference between today’s market and the market fifteen or twenty years ago, the differences would reach great extents. The way of organization of the market functions differently. What these changes refer to, and how did they affect the industry?
If you are interested in reading about the importance and correlation of time, speed, age, and value in the world of automobiles – the following article about the impact of car depreciation in the automobile industry might be fun!
What is the car depreciation?
Car depreciation is a term related to the pace at which the vehicle loses its value. Generally, any vehicle will lose its value at some point, but the difference in the rate at which it will lose it what the depreciation is about. The question is: how does this affect the automobile industry?
What influences the car depreciation?
Not all vehicles lose their value at the same pace. Some lose it more quickly, while others more slowly. Certain factors influence this pace. For instance, the color of the car can be one of the factors. Some colors are demanded more than others by the buyers. If your automobile has a color that is wanted in the market, its value will be harder to decrease quickly. Another important factor is the brand of the automobile.
Some brands which are considered to be high-quality, accessible, and respected maintain their value much longer than others. Gas price is an important factor when it comes to this topic, as well. The price of gas directly affects the cost of driving a particular vehicle. So, if there is a shift in the amount of gas, it may affect the car’s price. Lastly, the history of accidents should not be neglected. If your car has been damaged in the history, it might influence the loss of its value.
Besides these factors, there is one which stands out the most – the age of the vehicle. It is usually said that an average car loses its value for 20% to 30% after the first year. How is depreciation correlated to new vs. old automobiles? Take a look below to find out!
Depreciation and New Cars
Of course, everyone thinks that you cannot go wrong with buying a new car. It is usually said that the more unique the vehicle, the better. However, how is the speed of value loss related to the fact that the car is new?
New cars lose their value the fastest. According to some assessments, the moment the new car is driven off the lot, it loses around 10% of the value. After the first year, the total percentage will be around 30%, which means that it loses an additional 10% to 20% of the value throughout the first year.
If you are wondering what happens after the first year, the news is not that bad. In fact, after losing 30% after the first year, what happens is a decrease. So, it will lose from 10% to 25% of the value per year.
After five years, the loss will be around 60%.
How does this affect the buyers?
Because there is a large percentage of loss in the value, people usually don’t plan to trade or sell their new car within the first five years, because of the significant depreciation.
Depreciation and Old Cars
As explained earlier in the text, the first few years are crucial when it comes to the value loss of the vehicle. Therefore, if you plan to sell or buy a vehicle, it is probably better to do it with older cars when it comes to depreciation.
If you are buying a one-year-old automobile, you are saving around 20% to 30%.
When it comes to selling, it is also in favor of old cars. Depreciation is probably why people seem to be very interested in more past or used vehicles these days. Eventually, it might pay off when it comes to investment.
Even more, because it has never been easier to sell and get rid of the old automobile, the sellers/buyers are becoming fonder of this idea. There are companies which offer you many attractive deals, some of them are even coming to your house and picking up the car themselves.
To sum up, the notion of car depreciation has been fundamental to the automobile industry. Not only has it brought up new calculations, but it has also changed the way people feel about buying and selling their vehicles. Therefore, it can be said that this notion has been significantly influential in the world of automobiles. Not only does it dictate the timing of buying or trading, but it also affects selling. Unusually, for this reason, people often decide to go for the older or used vehicles. When it comes to sales, the offers seem to be better when you are selling the car, which will not lose its value in the future, or, in other words, the vehicle whose high depreciation period has passed.