Factors That Influence Depreciation

Many auto publications such as Auto Trader and Kelleys Blue Book have reported that depreciation is the single biggest expense regarding an automobile during the first five years of ownership. The value of a car vastly deteriorates after being purchased and driven off the car lot. Once the car is "used" instead of "new," the resale value is significantly less than what it had been even weeks earlier. There are multiple factors that contribute to car depreciation, and they can vary from car to car.

Color

The car color can have a large effect on how much it depreciates in value. Cars in more standard colors such as black, silver or white are more likely to be just as popular in five years as they are today. Off-beat or "trendier" colors such as yellow or pink are less likely to be as highly valued in the future and can be a detriment to the resale value of the vehicle.

Mileage

The lower the mileage of the car, the more attractive it is to potential buyers. Lower mileage generally means less wear and tear on the engine and the transmission and is a good sign to any new owner that his investment will last a longer period of time. Although the age of the car is important as well, a 10-year-old car with 50,000 miles on it is likely to be easier to sell than a 5-year-old car with 150,000 miles on it. The higher the mileage, the lower the value of the car.

Brand Name

Car companies have reputations that can either make or break the depreciation value on a car. If a particular make or model is known to have maintenance problems as the car ages, it will depreciate more than a car that has a sturdier reputation regarding repairs. Hondas and Toyotas are known for having greater resale value and suffer from less depreciation because of their traditionally lower maintenance needs, and this keeps them in demand from the buying public.

Initial Cost

The higher the price of the car when you first buy it, the steeper the depreciation when you drive it off the lot. Depreciation is generally calculated by percentage of initial value so comparatively, a less expensive car will also depreciate less over the years of ownership. Lower-costing cars are usually more popular to a larger number of people as well, which means its value will decrease by a smaller amount because there is a larger consumer demand for it.