Depreciation Distasters ... and how to sidestep them
There are two ways to get burned financially when you buy a new vehicle – the first is by paying too much for it up front. Have a guess what the second way is
Purchase price minus resale price is a decent barometer of overall ownership cost. So, if the purchase price is too high, or the resale is too low, the funding gap – paid by you – is excessive.
Sadly, people often get the purchase right, but they forget all about depreciation. It’s no good saving $10,000 up front if you lose $15,000 more to depreciation than you would have, had you bought the right vehicle in the first place.
What you must do is avoid buying a depreciation dog.
Go HERE for a free, independent, online guide to resale values. Check out how a five-year-old version of the car you’re after today compares to some of its key competitors at the same age. The difference between different brands and cars could be thousands.
You need to realize that the market value of your used car in five years’ time will be exclusively a function of supply and demand.
REDBOOK is a great way to identify the depreciation dogs before you discover that the trade-in won’t cover the payout in the finance. It’s not much fun to be in that position, or to discover that you’ve been paying $300 a week to the black dog of depreciation – for the past five years. If you get the depreciation wrong, it could easily cost you more than the fuel does every week. And you pay it, effectively, in a lump sum, right at the end of the deal.