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What Will Your Car Be Worth Down the Road?

What do you think the greatest single cost of owning and operating most passenger vehicles is? If you're like most people, you'll probably guess gas, insurance or repairs. While these are all expenses that are part of owning a car, they are not the highest cost. You may be surprised to know that depreciation is the single most expensive part of car ownership. Depreciation is the difference between what you pay for your car and what you can sell it for. It varies widely from car to car and changes with the number of miles driven. For an average intermediate-sized vehicle, it amounts to 32 percent of the total cost of ownership over 128,500 miles, the normal life expectancy of a car.

The importance of depreciation when you're choosing a car depends, in part, on how soon you intend to trade it in. If you plan to keep the car a relatively short time, say a year or two, depreciation is more important. That's because depreciation is usually greatest in the first few years and then levels off.

The age, mileage and overall condition of your car are generally the most important elements in establishing its resale value, but many other factors enter into the equation. Model type, options and color all affect the price you'll be able to get for the car.

Depreciation By Car Size

The Federal Highway Administration conducted a survey to determine average depreciation costs based on vehicle classes. The lower the figure is, the more you'll get when you sell, relative to your purchase price. Higher depreciation figures mean you'll get a smaller percentage of your purchase price back. As you look at new cars, keep in mind the information in the chart below.

Option Values

Some options will add to the value of your car when you sell it or trade it in, some will have little effect, and others will actually make your car harder to sell.

Depreciation Rates

Vehicle ClassCents Per Mile
Subcompact  8.6
Compact  8.7
Intermediate10.7
Full-sized car13.5
Compact pickup  8.7
Full-sized pickup  9.5
Minivan11.8
Full-sized van14.2

Adding to the value of your car are air conditioning, automatic transmission and rear window defogger.

Options that will appeal to certain potential buyers, but not others, and therefore have no dependable effect on resale value are a sunroof, cruise control, tilt steering wheel and a premium stereo system.

Some options are more trouble than they are worth because they add to the cost of operation or require more maintenance. These items will decrease the resale value: aluminum wheel covers, diesel engine, vinyl roof and a larger engine.

The Color Of Money

The color of your car could influence how easily you'll sell it and how much money you'll get for it. Red and beige are the most popular colors. Blue cars also sell well, unless they are a very light shade of blue. Unusual colors are not much in demand; expect less money from your resale with those colors.

Whatever kind of car you have, you will probably be able to get more for it by selling it yourself than trading it in. Many people, however, find that it's not worth the considerable time and effort that's required.

Keep in mind that the depreciation costs outlined in this publication only take into account the actual cost recouped at resale. The added value that many of these features and options give you while you are driving the car can only be measured by you.

See Us First

Whether you're heading to the car dealer behind the wheel of a trade in or with cash already in hand from a private sale, see Dollar Bank first. You'll be in a stronger bargaining position to deal on a new car if you have your financing lined up already. Ask a Dollar Bank Representative for today's low interest rate and convenient terms for your next car purchase or click here to view them online.

To try our loan calculators, click here.

The information presented in this publication is general in nature; it is not our intention to provide specific advice to individuals or a comprehensive discussion of the subject matter. We suggest that you consult with your financial or tax advisor, accountant or attorney to obtain specific advice or comprehensive information.
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