Ready for some new wheels? Taking time to educate yourself on this major purchase can save you big bucks before you splurge on a new ride. Here are four consumer-savvy steps to take before buying a car.
Research the resale
A quick lesson in deprecation: Simply put, when you buy a car, new or used, you are buying an asset that is guaranteed to lose value (also known as depreciation). Rates of loss vary by make and model, but you can generally assume a 15-20% depreciation of a car’s value each year you own it.
If you buy a new car, it depreciates even quicker. According to Kelley Blue Book, the true market value of a new car plunges from the retail price you paid to the dealer, to the wholesale price it’s actually worth, the second you leave the car lot — which can amount to thousands of dollars.[pull_quote align=”left”]Buy a car with a high resale value that resists depreciation better than other cars.[/pull_quote]Depreciation will continue to be your greatest expense for the first five years after you buy a new car. But that doesn’t mean that a new car is always a bad value, or that a used car is a good buy. It all rests in buying a car with a high resale value that resists depreciation better than other cars.
Check out unbiased sources like Kelley Blue Book or Edmunds to understand the “book value” of different models, relative to prices in your market. You can also research the “The Kelley Blue Book Best Resale Value Awards” (and past issues dating back several years) to understand what models are currently holding the most value. Researching Consumer Reports can also help you to understand the auto market conditions at any given time.