Cars lose around 10 percent of their market value the moment they leave the dealership. In five years, they would lose 60 percent. They lose value so quickly that they may lose the last dollar in a few more years. Then again, is it possible for cars to depreciate to zero dollars?
A car worth $27,000 will fully depreciate in 12 years, assuming linear depreciation is involved. However, the car market isn’t that static; makes and models’ rates of depreciation vary based on market forces like demand and supply. Nevertheless, it goes to show that full depreciation is possible for vehicles.
This is important for car owners trying to trade in their old wheels. The older the car, the less value it provides to help you buy a new car. Even Subaru’s Guaranteed Trade-In Program operates on market value. That’s why it’s important not to delay any decision in buying a new car or new used car.
Aside from subsidizing the purchase of a vehicle, there’s another reason to avoid depreciating the car to flat zero. Although today’s cars can last for more or less a decade, it’s only possible with regular maintenance, which slows down depreciation. If the average American adult drives around 15,000 miles a year, in a decade or two, it will wear out even with repairs.