Depreciation


#1

Is there such a thing as a car that does not lose it’s value?


#2

Yes, if you buy a car for $500 and keep it running, it will not drop in value.


#3

No. Having said that, the original 2 seater Thunderbirds actually held their value once Ford decided to go to a 4 seater model. If you had bought a 1957 T Bird and NOT DRIVEN it, it would have kept its original value of about $4000 loaded and increased significantly!

On the other hand, if you had invested $4000 in 1957 in IBM or Xerox stock, you would have far more than the $50,000+ a 1957 T Bird typically brings, minus the cost of storing it all these years.

In other words, cars are not really an investment; ask Jay Leno. The odd person who spots a car that is significant and has low volume production, will make a short term profit. All normal cars depreciate till about 20 years, and then, if they are in mint condition, start appreciating again. How much depends on its uniqueness. Keep in mind that the $50,000+ or so for a 1957 T Bird is in depreciated currency; $4000 in 1957 would amount to about 5 times that much, or $20,000 today.


#4

There’s a fella here that bought a $450 Taurus a year ago with a bad headgasket. He’s been driving it that way ever since, for 8,000 miles. That car is probably worth what he paid for it. But that’s the only daily driver I’ve ever heard of that didn’t lose its value.


#5

Back in 1977, a friend of mine bought a Mercedes Benz 240D diesel. It was the only car that our credit union would loan him the full amount because he couldn’t get upside down on the ownership (owed more money than the value of the car). The cost of the car was $10,000. The depreciation was there, but it was at a slow rate.

My dad bought a brand new Chevrolet in 1939 for $650. Right after WW II, he could have sold this 1939 Chevrolet with 70,000 miles for $700. He didn’t do it because there was such a demand for both new and used cars that he would have been without transportation.


#6

Not a new one. Every new Rolls, Ferrari, and Mercedes suffers huge depreciation (how’s $2,000/month grab you?). The only one that won’t will be a used car bought cheap, or a lucky purchase of an older car that then appreciates.

What do you have in mind?


#7

The answer is no. All cars lose value. The newer the car the faster the value declines. The only exceptions are some very old and very rare cars, that have been professionally restored and are not driven regularly. Even these cars take expensive maintenance to keep them pristine so they hold their value.

You can reduce depreciation by buying cars 4 years of age and older, cars take the biggest depreciation hit in the first 4 years of ownership. Of course these 4 year old cars will have higher maintenance and repair costs.

No matter how you slice it owning a car is expensive.