Yeah, I think cars are probably only good for 15-20 years in the salt areas. Maybe 25-30 years in rust free areas, but they probably still fall apart after a certain mileage. The only problem with an expensive car like mine that was 65k new, when it's 15-20 years old if something major goes, it's probably going to be a 2-5k repair so people are going to dump it when the sale price of the car is in the 5-8k range.
WHY do vehicles depreciate so fast?
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The mechanical usefulness life of a car is probably not linear. WELL MAINTAINED, it's probably a slow decline for the first 2-3 decades and then more rapid as parts reach the end of their lifespan and repairs cost more than the vehicle value. Cars end up at year, say 30, with 1 major issue but otherwise serviceable. But that issue is more expensive than the perceived value so it's parted out and scrapped. For instance, a old BMW might be worth $5000 with plenty of life, but has a $10,000 mechanical problem. Since few are willing to repair $10,000 on a $5000 car, it's scrapped. Hence, the utility value of a car is a slow decline until it often just drops off at the end.
And this probably explains why trucks hold more value longer. Cars are more pedestrian and when slightly worn or damaged, they still have the same utility but they drop with status/perceived value. Trucks are more robust but also generally expected to be worn or damaged so the owners don't care as much about paint or body damage. And truck owners tend to be more mechanical in nature and maintain them better.
The average age is around 12 years. Given millions of brand new cars are on the roads, that means there are a large % of 24 year old cars to offset that. Also, cash for clunkers really impacted that number, clearing a lot of aged cars off the roads. A real taxpayer subsidized boon for auto makers I'd say.
I don't know why this myth continues. How many cars did cash for clunkers get rid of? About 690k in 2009. That was 12 years ago. And they were already old back then. There's about 109 million cars registered in the US. About 17 million new car/trucks were sold in 2019. That 690k 12 years ago was just a drop in a bucket. Hurricane Sandy alone destroyed over 250k cars.
Oh, good points I hadn't considered. I'm now informed and will stop repeating the myth.
Cheap used cars almost universally get auctioned and shipped overseas
It’s mainly because of financing. You can often buy a new car at 0% financing. But as soon as it’s driven off the lot you have to pay cash or finance at 4-5%. That’s a huge difference. Unless a car is significantly cheaper, it is still cheaper to buy new.
You can get used auto loans at 2.59%. But with new cars, the automakers are not as strict as banks so the financing is easier. Some people are just too poor to buy a used car though, their credit isn't good enough to qualify but will qualify for a new car because the automaker wants to move the metal.
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Yeah I agree, I owned a $80,000 dollar car once...and ten years later that car still thought it was an $80,000 dollar car, in the repair department. When at that point it was a $15,000 dollar car.
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Good point, and that’s were I do see cars that are 20 years old...probably because it’s warm, and vehicle inspection is non existent.
Not getting 2.59% if you have bad credit.
Right, the standard disclaimer is that not everyone will qualify. It pays not to be a deadbeat.
I got rid of one of my Volvo's during CFC a 1987 with 370K miles. It was worth probably around $500 at most on a trade in. Feds gave me $4500 and the state tossed in another $500. $5000 for a 22 year old car with 370K miles that needed probably $2000 worth of repairs to get another year or two out of it.
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Yeah I think that’s fair and probably a great idea...buy a 3 year old car at a depreciated price. You still have a car with 80% of its life expectancy and you have also missed on the depreciation hit somewhat. Tax, insurance, yearly excise tax will be less. And yet you still have a vehicle that should be trouble free for a few years. Take good care of it and maintain it properly and you may be able to get 200,000 miles out of it without major issues.
200,000 seems to be the new “benchmark” for mileage expectancy for cars, whereas it used to be 150,000 miles (at least from what I’ve searched/read). I think it really depends on brand - BMW tells their factory reps that they don’t care about their cars after 100,000 miles because their customer base don’t keep them much longer than three years. Thought about that and when you think about it, it’s probably accurate. Meanwhile a Toyota owner might keep theirs 15 years or more.
There are many “money experts” suggesting buying a car that’s 3-5 years old...paying cash for it, and keeping it as long as you reasonably can.
There’s a few things that come to mind:
1. Cars are a trend. Values drop when trends die out. Just normal product life cycle.
2. unlike real estate, cars can theoretically be produced til the end of time. There is only so much land avaliable on the planet.
3. Over production. Mass market cars don’t hold value. If they only made 1000 F150s I’m sure people would be paying out the a** for one.
4. prices are inflated for profit. For instance all F150s are built on the same assembly line using the same tools, same workers, same parts. Why does a F150 Limited crew cab 4x4 cost nearly double of a F150 XL crew cab 4x4? I suppose leather and power seats don’t cost more than 5k per car.
5. Older vehicles have a higher risk factor for a big repair. Value and desireability. Go on to any used car lot I guarantee you only the fraction of the cars have solid maintenance records. To a majority of people a car is an appliance. Not too many people clean the condenser on their fridge do they? Same idea. People might do quick lube oil changes and it stops there.
add all of that together plus the fact that a decent running car will always be worth some money means someone who buys a 2002 Volvo will only lose a fraction to depreciation than someone in a 2022.
me personally I will take a depreciation hit on a new car just to have everything new. I am pretty picky when it comes to the condition of the cars. 5k 10k not so much but anything pushing 30k and up thing better be **** near perfect. Only defects I’ll accept are manufacturing. Not misuse.
1. Cars are a trend. Values drop when trends die out. Just normal product life cycle.
2. unlike real estate, cars can theoretically be produced til the end of time. There is only so much land avaliable on the planet.
3. Over production. Mass market cars don’t hold value. If they only made 1000 F150s I’m sure people would be paying out the a** for one.
4. prices are inflated for profit. For instance all F150s are built on the same assembly line using the same tools, same workers, same parts. Why does a F150 Limited crew cab 4x4 cost nearly double of a F150 XL crew cab 4x4? I suppose leather and power seats don’t cost more than 5k per car.
5. Older vehicles have a higher risk factor for a big repair. Value and desireability. Go on to any used car lot I guarantee you only the fraction of the cars have solid maintenance records. To a majority of people a car is an appliance. Not too many people clean the condenser on their fridge do they? Same idea. People might do quick lube oil changes and it stops there.
add all of that together plus the fact that a decent running car will always be worth some money means someone who buys a 2002 Volvo will only lose a fraction to depreciation than someone in a 2022.
me personally I will take a depreciation hit on a new car just to have everything new. I am pretty picky when it comes to the condition of the cars. 5k 10k not so much but anything pushing 30k and up thing better be **** near perfect. Only defects I’ll accept are manufacturing. Not misuse.
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My take it that a home is a forever possession. A vehicle is an appliance that (most of the time) gets replaced regularly (unless it's a hyper-collectable). A good solid mid century home will last pretty much indefinitely if it's maintained.
Just two totally different entities.
Just two totally different entities.
First off, you have land or a fraction of the land in your real estate unless it is a mobile home or trailer home having to pay lot rent. You notice there is a huge difference in home with lot or without lot that a real home will over time adjust to inflation or appreciate, while mobile home price would depreciate as it age. This tells you it really is the location rather than the physical building that is worth the value.
Second, home price is highly depended on the location rather than just the building labor and material cost. The example I frequently use is a house about to fall off a cliff is worthless while a burnt out house in a highly desirable neighborhood is worth quite a bit, and people will pay a lot to restore it. This is not because of the building cost but rather the location. Location dictates the upper and lower bound of how much the building is worth, not the other way around. p.s. you can get a home for free in many part of the world or even in the US like Detroit, but many people won't want it.
The higher the price of an item the more it is valued as a tool vs a toy. Fashion, let's use clothes as an example, have value dropped much faster when it goes from new to no longer new, even in the same condition. As people move from fashion to tool valuation changes to "how much can I use it and is it worth paying this much" instead of "I really want it because it makes me happy". This is why people would buy a new model year car at a much higher value than when it is older and everyone and their mom already has it. Remember the new beetles or PT Cruiser? They were in super high demand and then eventually nobody wants it. You don't see the same depreciation on new vs used semi truck compare to new vs used Lambo or Mercedes.
One last thing about demand and supply: you have limited space to build homes, you can go further but you cannot compare it due to commute distance or location / school. You CAN move a car around and sell elsewhere. So what happen is when a car is new you have way higher demand and low supply but when you keep selling the same thing without refresh people will have more used car to choose from, driving down the new car prices. This happens in all mass produced product like electronics, furniture, cars, etc. The most profitable time is the first 6 months of the release, but you cannot do the same with house because commute is not the same and neighborhood is not the same, and land is finite.
Second, home price is highly depended on the location rather than just the building labor and material cost. The example I frequently use is a house about to fall off a cliff is worthless while a burnt out house in a highly desirable neighborhood is worth quite a bit, and people will pay a lot to restore it. This is not because of the building cost but rather the location. Location dictates the upper and lower bound of how much the building is worth, not the other way around. p.s. you can get a home for free in many part of the world or even in the US like Detroit, but many people won't want it.
The higher the price of an item the more it is valued as a tool vs a toy. Fashion, let's use clothes as an example, have value dropped much faster when it goes from new to no longer new, even in the same condition. As people move from fashion to tool valuation changes to "how much can I use it and is it worth paying this much" instead of "I really want it because it makes me happy". This is why people would buy a new model year car at a much higher value than when it is older and everyone and their mom already has it. Remember the new beetles or PT Cruiser? They were in super high demand and then eventually nobody wants it. You don't see the same depreciation on new vs used semi truck compare to new vs used Lambo or Mercedes.
One last thing about demand and supply: you have limited space to build homes, you can go further but you cannot compare it due to commute distance or location / school. You CAN move a car around and sell elsewhere. So what happen is when a car is new you have way higher demand and low supply but when you keep selling the same thing without refresh people will have more used car to choose from, driving down the new car prices. This happens in all mass produced product like electronics, furniture, cars, etc. The most profitable time is the first 6 months of the release, but you cannot do the same with house because commute is not the same and neighborhood is not the same, and land is finite.
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Exactly - C4C was a drop in the bucket compared to the 50% drop in new car sales. That was millions of new cars vs under a million crushed.
Since new car purchases usually involve a trade, the loss of say 10x as many trade-ins did more to the used car market than did crushing 600-700k cars.
It did hurt some, probably at the lowest tiers of the market. But the real crushing blow (see what I did there) was the nearly 50% drop in new car sales and the subsequent lack of trade ins because of the non-sales of new cars.
You cannot compare a beater vs a fully restored classic that has already extinct from junkyard.
A model T that is not yet crushed today is a classic, people will restore it and treasure it like a collectible.
A beat up Ford Taurus with slipping transmission is not going to be a classic for at least another 20 years, or without 99% of them already crushed, and the last man standing getting a 3x the original manufacturing cost restoration.
You cannot compare the 2.
One reason is that a lot (maybe most?) people don't take care of their vehicle. So how much are you going to pay for a used vehicle if have reason to believe that it was neglected? This applies to a lot of things, not just vehicles.
