Apart from your house, your car is likely your biggest financial investment. However, unlike a home, vehicles start to lose their value almost instantly.
Understanding the factors that cause a car to depreciate might help you preserve some of its value, which can improve your financial fitness.
Here are 13 things that cause your car to lose value over time.
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Age
The older your car, the lower its resale value. There are exceptions to this rule, such as for classic cars.
But in general, even though a well-maintained older car will retain its value longer, the older the vehicle, the lower the chances you'll resell it at a high price.
Mileage
The more miles you've driven your car, the more wear and tear it's experienced on the road, which makes it less valuable.
While you can't do anything to decrease mileage, basic maintenance can keep your car in good working order and preserve some of its value for longer.
Accidents
Every accident your car endures decreases its resale value.
No matter how well you repair the car after a crash, the accident will still appear on your vehicle’s history report — and some buyers simply aren’t willing to gamble on a car that has already required several repairs.
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Condition
Do you perform frequent car maintenance, such as changing the oil regularly? If you notice a problem, do you bring it to the shop right away?
Taking care of your car and keeping it in top condition should help it depreciate at a slower rate. You'll almost certainly be able to sell it for more money than if you had failed to keep the car in good condition.
Brand
Some car brands depreciate faster than others. In particular, luxury brands lose their value relatively quickly.
If you plan to invest in a luxury car, understand that you'll likely recoup less of the cost than if you had purchased a non-luxury vehicle.
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Make and model
Some car makes and models are more popular than others, and these beloved cars retain their value better than less popular vehicles.
For instance, a 2024 Ford Bronco has a five-year resale value of 66.7% — which is substantially better than the average resale value of just 42.4% for most cars, according to Kelley Blue Book.
Certain makes of Toyotas, Chevrolets, and some luxury cars, such as BMWs and Porsches, also have above-average resale values.
Climate and weather
Where you live and what kind of weather you drive in can impact how quickly your car depreciates.
For instance, if you live in a region with heavy winter storms, you probably drive on salted roads. That salt can wear down your car faster. On the flip side, if you live in a warmer, milder climate, your car might stay in better condition and depreciate at a slower rate.
Interest rates
Some economic factors outside of your control can impact a car’s resale value. For example, when times are tough, prospective car owners find it harder to afford to buy a vehicle.
As a result, selling your car could take more time than you had hoped, and you might end up accepting an offer for less than you would during better economic times.
Supply and demand
Sometimes, the car sales market is flooded with particular car makes and models. Even a well-cared-for vehicle with minimal mileage might go for less because of high supply and low demand.
On the other hand, if you have a car in high demand while supply is low, you could get more for your vehicle than its depreciation rate might suggest.
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Custom paint jobs
The more personal detail you add to your car, the harder it might be to sell. In particular, steer clear of custom paint jobs with bright, unorthodox colors.
You might be able to find the one person who loves bright purple with orange highlights as much as you do. However, you will have a much bigger resale audience if your car remains the standard navy, white, black, or red.
Other custom modifications
Hyper-tinted windows, underglow lights, spoilers, grille inserts, and other aftermarket modifications might increase your own love for a vehicle. But just like custom paint jobs, custom modifications can lower your car’s value once it’s time to sell.
Negative customer perception
Did your current car go through a round of recalls for bad brakes or faulty airbags? The general public’s perception of your car brand or model can impact its eventual resale value.
Even if you have dealt with whatever problem caused the recall, the negative image can stick in people’s minds.
Ride-hailing and renting
If you rented out your car or used it to earn extra income driving for a ride-hailing company such as Lyft, expect its resale value to decrease.
The car will likely have more wear and tear than if you used it for commuting and travel only, not to mention a higher mileage reading on the odometer.
Bottom line
You can’t change the fact that your vehicle’s resale value starts to drop the minute you drive it off the car lot.
However, taking good care of your car, going easy on the mileage, and taking other steps can help you get ahead financially by slowing down your car’s depreciation process.
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