Why do some cars depreciate more than 20% in the first year?
The depreciation of a vehicle is a phenomenon that affects all cars, regardless of their brand, model, or year of manufacture. However, when it comes to new cars, the depreciation is especially pronounced. In fact, it is common for a car to lose up to 20% of its value as soon as it leaves the dealership. Next, we will analyze the main reasons behind this phenomenon.
Firstly, the usage time is the most important factor influencing the depreciation of a vehicle. Like any other consumer good, a new car begins to lose value the moment it is put into circulation. In fact, it is estimated that a car loses 10% of its value in the first year and 20% in the second. Therefore, if a new car is sold after two years of use, it is likely to have lost a third of its original value
Another reason behind the depreciation of new cars is the supply and demand in the market. In recent years, the used car market has experienced strong growth. This is partly because the prices of new cars have increased significantly. For example, according to data from the consulting firm MSI, the average price of a new car in Spain stood at 25,840 euros in 2021, a 5.5% increase from 2020. On the other hand, the used car market offers a wide range of models and prices, making it more accessible to many consumers. Additionally, the waiting time to get a new car can be very long due to chip shortages, leading many buyers to opt for a used vehicle as an alternative
Another factor influencing the depreciation of a vehicle is the interest rate. If interest rates are high, many people can't afford to finance a new car, which reduces demand and therefore the value of new vehicles. On the other hand, if interest rates are low, it's easier to finance the purchase of a new car, which increases demand and therefore its value
Finally, the brand and model of the car are also important in determining its depreciation. In general, brands and models that have a higher demand in the used car market tend to depreciate less. On the contrary, less popular brands and models usually depreciate more quickly
In conclusion, the depreciation of a new car is a complex phenomenon that is influenced by multiple factors. Even though usage time is the most important factor, market supply and demand, interest rates, and the car's brand and model also play a crucial role. Therefore, it's important for buyers to consider these factors when deciding whether to buy a new or used car, as this can have a significant impact on the value of their long-term investment
