So what is
the value of a new car?
You can lose thousands once you drive
your new car off the dealer's lot. Why?
Because the price you paid for the car
is the retail price (not counting the
taxes and licensing that are sunk costs).
- If you drove that new car back to the
dealer, the most the dealer will pay is
the wholesale price (the same price he
would pay the manufacturer).
- So your value drops instantly from the
retail price to the wholesale price once
you take possession. That drop could be
in the thousands depending on the type
of car and model.
So why not
buy used?
You will be paying for the market
value of the car instead of dealer markup.
Some 1 year-old cars are great values
that can save you thousands
in financing costs.
Beware of
depreciation (which can vary by car)
How depreciation works?
A car loses about 15-20 percent of its
value each year. For example:
- Let's start with
a 1-year old used car worth
$15,000 that loses 15% of its value
each year.
- At 2 years old, the car value is worth $12,750 (85%
of $15,000).
- At 3 years old, the car value is worth $10,838 (85%
of $12,750).
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SayEducate BLOG: Simplifying Life Decisions
