VERIFY: Does a Car Lose 20% of Its Value When You Buy It?

Does A Car Lose 20% Of Its Value When You Buy It?

There’s nothing like the smell of a new car. But, chances are the smell of the car will last longer than the car's value. 

QUESTION: Does your new car lose value the second you drive it off the lot?

PROCESS: To verify, we reached out to Jonathan Linkov, Deputy Auto Editor with Consumer Reports. The nonprofit organization gives unbiased product rating and reviews.

Linkov said, a new car’s value fall fast.

“If you bought a car, took it home for a day, tried to sell it back to the dealership, they would give you less for the car than you paid just the day before.”

Right now, a new car averages $35,000 and will be worth $31,000 in six months. In one year, that same car will only be worth $28,000. That’s 20 percent less in 365 days.

And the value will continue to fall sharply.

“Within three years, the average new car loses roughly 50 percent of its value.” Linkov explained.

Why? Well, it depends. If gas prices are low, fuel-efficient cars will lose their value faster. If SUVs or trucks are in demand, they’ll lose their value slower.

But, get this. New cars don’t just lose value when you buy them. They lose value every single day, even if they’re sitting on a car dealership lot.

“If you buy a 2017 model in the months of August, September, October, it’s almost at the end of 2017. In fact, the 2018 models might already be out there. So, data wise, you already have a one year old car.”

Linkox said buying a new car later in the year is the perfect opportunity to negotiate, since it’s already lost a huge chunk of its value. And, remember how your car loses 50 percent of its value in the first 3 years?

“The three-year period is really the sweet spot for buying a used car,” said Linkov. “The remaining 50 percent value of the car is going to be dropped over the life of the vehicle.”

So, this one is verified. A new car’s value drops the moment you buy it. 

SOURCE:

Jonathan Linkov, Deputy Auto Expert, Consumer Reports

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