From the minute you take ownership, your new (or used) vehicle will almost always begin losing value. Your coaches explain depreciation.

AliciaPlanning to buy a car sometime soon? Before you do, there’s a critical concept you need to understand. It’s called “depreciation.”

CassieSimply put, depreciation is when the value of a car goes down due to wear and tear over time.

AliciaWell said! Almost all cars depreciate, or go down in value, over time. In fact, the value of a new car can drop hundreds or even thousands of dollars the day you drive it off the car dealer’s lot. Whether it’s new or used, it’s going to start decreasing in value because the condition of the car is going to deteriorate as you drive it over time.

CassieHow much will your car lose in depreciation? Well, exactly how much — and how quickly — your car will depreciate will depend on a variety of factors, including the make, model, year, where you live and how much you drive it. But the important thing to remember is that buying a car is typically not an “investment” that’s likely to grow in value over time. The reality is that a car is an expense — an expense that carries a lot of additional expenses with it, such as fuel, maintenance and repairs, insurance, taxes, fees … and depreciation.

Remember these key points:

  • Depreciation = the decrease in the value of a car due to wear and tear over time.
  • Your car is not an investment.
  • Car ownership is an expense.

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