How to Minimize Your Car’s Depreciation

Every smart merchant knows profit is made when you buy, rather than when you sell. Similarly, if you’re concerned about how to minimize your car’s depreciation, your efforts must begin before you buy the car — rather than once you have it.

Basically, it all comes down to choices you make.

Make & Model

It seems high schoolers and cars are measured by their popularity. The more highly a car is beloved and sought after, the less depreciation it will experience. When it comes to mainstream cars, the primary factors include a reputation for quality construction, trouble-free motoring, safety and style. However, that last one figures considerably lower than you might imagine. After all, Jaguar has some of the lowest resale values on the market despite the fact it builds some of the best-looking cars.

Historic Value

You can get a good idea of how much depreciation will affect a vehicle you’re considering by looking at its predecessor’s track record in that regard. Go back and see what a car like the one you’re considering sold for three to five years ago, then look at what it’s worth today. This will give you a pretty good idea of what to expect for yours in the coming years.

Cars with a history of high resale value tend to maintain that status.

That being said, you have to be careful to look at individual models rather than brands as a whole. Some products within a given manufacturer’s lineup often do better than others in that regard. As an example, while Toyotas in general hold their value quite well, Camry and Corolla do better than Avalon.

Go with a Common Color

Yellow paint over a red leather interior makes for a particularly racy — and opulent — combination. However, unless it’s a sports car, you’re going to find buyers on the secondary market will be few and far between for such a flashy color scheme.

Now here, we’re certainly not suggesting you sacrifice your individuality at the altar of resale value — per se. It’s up to you to consider how important that distinctive look will be when you decide to sell to get a different car.

Generally speaking, the more appeal the color has to the largest number of people, the more that car will be worth on the secondary market. In other words, it will depreciate less. White, black, silver and grey are your best bets.

Lease or Go Used

Depreciation is already built into the deal when you lease a car. In fact, that’s exactly what you’re paying off each month. This is one of the chief advantages of leasing vs. buying a car. The leasing company estimates the value of the auto at the end of the contract and spreads the difference between that amount and the sale price over the number of months your lease agreement dictates.

You can also reduce the depreciation for which you’ll pay by purchasing a used car. This is particularly true if you time your acquisition carefully, then get out of it at just the right moment. New cars take their initial major depreciation hit during the first year. They then experience another significant one after about the fourth year. You’ll avoid both if you buy a one-year old car, keep it approximately three years and sell it before the second hit happens.

These four tactics have been proven to minimize the depreciation for which an owner will pay over the life of a car.

Keep in mind: You must also make an effort to keep the mileage reasonable and the mechanicals in good condition. You’ll also need to keep the body and the interior looking good. Simply put, a car’s resale value will always be higher if you keep it desirable.