Significance

• Depreciation is the rate at which a vehicle loses its value in the marketplace. With the exception of collector autos, once a vehicle has been sold, it is rarely sold again for the same price. This means when you purchase a new car, the car immediately loses some of its value when you drive it off the dealer's lot. It also means when you buy a pre-owned car, even if it is in like-new condition, you will not pay the full sticker price.
  
  

Causes of Depreciation

• Multiple factors effect vehicle depreciation. Geographic location and time of year can both play a part. The make and model of the vehicle also affects the depreciation rate -- in general, the more expensive and well-known the brand, the less it will depreciate. A vehicle's age, mileage, accident record and the general condition are the primary influences factored in the depreciation rate.
  
  

Considerations

• It is fair to assume an automobile will lose 15 to 20 percent of its value per year, though the depreciation is greatest during the year the vehicle is made and sold. Charlie Vogelheim, editor of Kelley Blue Book says "Just the difference between wholesale and retail prices is a large amount of what goes away right away." Still, it's important to remember the depreciation level of every car is unique.
  
  

Benefits

• If you're in the market for a car; you can use depreciation to your advantage if you're willing to buy a used vehicle. Program cars, leased automobiles, and even dealership loaner models often end up on car lots in nearly new condition. But they cost considerably less than they did new, thanks to depreciation. According to Kelley Blue Book, vehicles that have seen fast depreciation rates include: Hyundai Accent, Kia Spectra, Chevrolet Cavalier, Dodge Neon, GMC Sonoma, Pontiac Grand Am, Chevrolet S-10 and Dodge Stratus.
  
  

Warnings

• Not all vehicles depreciate at the same rate. Popular and reliable brands, such as Honda, don't lose their value as quickly as some of their competitors. The Kelley Blue Book says vehicles such as Mini Cooper, Porsche 911, Lexus SC430, Acura TL, Honda S2000, Dodge Viper and the Lexus GS300 all hold their value well. When buying a vehicle, it's a good idea to research average prices of the make and model you're interested in, as well as prices in your area.