3 Strategies for minimising car depreciation

Buy used and run it down strategy!

Three Strategies For Getting the Most Value Out of Your Car

It’s no secret that cars lose value. Everybody knows it, and it happens as soon as you drive your new car off the lot. New cars can lose 15-35% of their value in that first year, depending on the vehicle. Stats like that are used by a lot of sensible people as a deterrent from ever buying a new car. Some people accept this and go the rest of their happy way with used cars. But that isn’t the whole story. In fact, there are two basic strategies that real drivers use to keep the most value in their car. A vehicle is an investment, new or used. I’ll share with you the three ways to make the most of this investment, whatever kind of car you drive.

1) Buy a New Car and Trade it in Frequently. I would only recommend this strategy for people who have enough money to leverage the constant payments. But for people who do, and who love new cars, this is really the only way to make the new car plan work. Because the value of a new car drops off steeply in those first two years, it’s important to trade the vehicle back in during those two years, while the value is still at its highest. This will cover well more than half the cost of a new car. You’ll always be making payments, to cover the difference, but you’ll always have the newest car on the market, one that, eventually, you own at least most of.

2) Buy New and Drive it Forever and Ever and Ever. My parents’ strategy. I remember the day we bought our first NEW Minivan. We weren’t exactly the envy of the road, but it was a pretty special day for the kids and parents alike. They drove that thing for more than a decade, putting well over 100k miles on the odometer. By the time it broke down for good, 13+ years later, they had long since paid it off. At this point, Mom didn’t just go out and buy another one and start the whole process over. She naturally melded into….

3) Always Buy Used and Drive the Thing Into the Ground.

Buy used and run it down strategy!
Buy used and run it down strategy!

This is probably the most money-saving strategy of all. Used cars still lose value every day, just not as much as the new ones. If you buy a used car and drive it till the repair bills get out of hand, then replace it with a newer old car, you can always be on the road, without losing 20% or more on your investment every year through depreciation and repair costs.

So that’s the three ways to save on different car buying preferences. I tend to be a #3 man myself, opting for vehicles that have a history of living a long life on the road. Surprisingly perhaps, these tend to be work vehicles, those with strong and simple designs. These are easy to repair and can stand up to a lot of abuse. In fact, my 23 year old Jeep is broken down outside, waiting for me to replace it. I’ll probably go with a newer, old car. But maybe one day, I’ll buy a brand new one…. Whatever you choose, I wish you happy driving and few potholes.