I drove a 20+ year old car up until I had a kid, and suddenly I started to care about those safety features from the previous 20 years (like airbags and crumple zone improvements).
Then assume straight line depreciation between the car brand new and the car when it is scrap. If a $60,000 car lasts 20 years and you own it the whole time, you can consider the depreciation to be $3000/year if you’d like.
Either way, at the end of the car’s useful life you need to be prepared to pony up more money to buy the next one.
Unfortunately, you can’t ignore depreciation. It’s rarely possible to actually drive a car into the dirt, as they can last for hundreds of thousands of miles if properly maintained.
Even if you intend to drive the car into the ground, you usually can’t. Every time you get on the road it’s a roll of the dice. Over enough time, eventually you roll snake eyes. You can be the best driver in the world, you can’t beat physics. If someone pulls out of a parking lot right in front of you, you’re going to crash. You can’t skill your way out of minimum stopping distance.
And this happens, depreciation matters regardless of your choices. The insurance company is going to offer you a settlement based on the depreciated value of the vehicle. Sure, in theory you could say, “well, they gave me the value of a 10 year old car, so I’m just going to buy another copy of the same car I just totaled!” But that rarely works in practice. Once they get that old, you really have to worry if the old owner took care of it properly or not. Driving a car into the dirt works well when you can be the original owner and know that the maintenance has been kept up with.
All cars get driven to the ground. You save money by being the only owner, and not changing car every 3 years. In that case, depreciation is irrelevant. Your insurance case is far from being average.
I said I’d drive my first car until the wheels fell off.
Well, one day it actually did, coming around a bend on a highway. Fortunately there weren’t many other people driving out at the time. I ended up flipping it over on the embankment, single-car collision.
I stayed true to my word. Never fucking said it about another car since.
Again. you can only do so much, especially if we’re talking about buying a new vehicle today and driving that into the ground. Sure, you can keep things maintained. But even if you’re the world’s most skilled driver, you can’t control other people.
Just this last year we lost a 15 year old Corolla. We had been planning to drive it into the dirt. Driving down a side street, maybe 30 mph. Some person doesn’t look both ways properly and pulls out right in front of us from a parking lot. No time to stop. Insurance declared it a total loss. Not worth fixing. Would cost more to repair than the thing is worth.
True that. Just got hit with a 2k maintenance bill for my 20 yo vehicle and looking to pivot to an EV. It helps that I don’t drive much and work from home but I’m certain that my wife would prefer to drive the EV to and from work rather than her hybrid.
In the context of OP, depreciation means that a “$50K when new” car may only be worth ~$35K if you choose to buy it 1-2 years later.
So it’s not so much about it’s residual value at any point in time, but rather how EVs tend to have a steeper depreciation curve at the beginning - making lightly used models a more attractive bargain.
What a weird and useless metric to think of when buying a new car. They will pay you just less then the cost of a replacement, so why does buying a car with a higher book value mean anything? Like are you just picturing yourself in an crash when looking at cars?
This is like asking whether you would like more money and saying no. It’s also troubling some people have already forgotten the lessons of the 2008 financial crisis.
Cars crash; 6 million crash annually in the United States. They get sold. If you finance a vehicle, it may not be on your schedule. Loans are based on income, not residuals. Lose the income and the residuals are all that prevent negative equity. Crash the car and you may end up with a loan but no car.
If you are so high income or wealthy it doesn’t matter, congratulations. Otherwise, naivete is not a great financial strategy with tens of thousands of dollars.
This is like asking whether you would like more money and saying no.
Its like spending more money on a depreciating asset with the assumption of crashing it and needing the value to be high. Its the weirdest financial choice since the 2008 financial crisis. Hell like the 2008 crisis this is borrowing in such a stupid way that you are expecting failure.
People can not afford new cars, at all. Financing a car is always a losing proposition. And buying a car based off its potential payout in the future is very very odd. Even at 6 million crashed a year in the us, there are 297.5 million registered vehicles there as well. That is a 1/50 chance to have your car in a crash if you are average, and since I know of people who are crashing every year or two the mean driver should be above that. Are you crashing a car more? We are talking about a expected 20ish year lifespan of a car with those numbers, why are you acting like people are naive for not buying into this odd view?
If you are not a car salesman, maybe you should talk to less of them in your life? Since this sounds a lot like the sort of crazy koolade passed out at a consumer cult.
The only value you are talking about is the book value, that all cars tend to lose over time making the whole idea of shopping with that in mind strange and pointless.
Maybe I’m weird, but I never consider depreciation. If the car is worth anything more than scrap value, it’s not yet time for a new car.
That’s what I do too. I just thought I’d pull out depreciation before a genius does.
I drove a 20+ year old car up until I had a kid, and suddenly I started to care about those safety features from the previous 20 years (like airbags and crumple zone improvements).
Then assume straight line depreciation between the car brand new and the car when it is scrap. If a $60,000 car lasts 20 years and you own it the whole time, you can consider the depreciation to be $3000/year if you’d like.
Either way, at the end of the car’s useful life you need to be prepared to pony up more money to buy the next one.
Unfortunately, you can’t ignore depreciation. It’s rarely possible to actually drive a car into the dirt, as they can last for hundreds of thousands of miles if properly maintained.
Even if you intend to drive the car into the ground, you usually can’t. Every time you get on the road it’s a roll of the dice. Over enough time, eventually you roll snake eyes. You can be the best driver in the world, you can’t beat physics. If someone pulls out of a parking lot right in front of you, you’re going to crash. You can’t skill your way out of minimum stopping distance.
And this happens, depreciation matters regardless of your choices. The insurance company is going to offer you a settlement based on the depreciated value of the vehicle. Sure, in theory you could say, “well, they gave me the value of a 10 year old car, so I’m just going to buy another copy of the same car I just totaled!” But that rarely works in practice. Once they get that old, you really have to worry if the old owner took care of it properly or not. Driving a car into the dirt works well when you can be the original owner and know that the maintenance has been kept up with.
All cars get driven to the ground. You save money by being the only owner, and not changing car every 3 years. In that case, depreciation is irrelevant. Your insurance case is far from being average.
If you’re going to reply, at least address what I wrote. You completely ignored everything I wrote.
I said I’d drive my first car until the wheels fell off.
Well, one day it actually did, coming around a bend on a highway. Fortunately there weren’t many other people driving out at the time. I ended up flipping it over on the embankment, single-car collision.
I stayed true to my word. Never fucking said it about another car since.
Tell that to my 40 year old daily driver. Just fix your stuff…
Again. you can only do so much, especially if we’re talking about buying a new vehicle today and driving that into the ground. Sure, you can keep things maintained. But even if you’re the world’s most skilled driver, you can’t control other people.
Just this last year we lost a 15 year old Corolla. We had been planning to drive it into the dirt. Driving down a side street, maybe 30 mph. Some person doesn’t look both ways properly and pulls out right in front of us from a parking lot. No time to stop. Insurance declared it a total loss. Not worth fixing. Would cost more to repair than the thing is worth.
Can cost you more to maintain it though.
EV cost more to maintain then gas?
I mean not replacing a 20 year old car can cost you more than a monthly payment of a newer car. My ev has been going strong.
True that. Just got hit with a 2k maintenance bill for my 20 yo vehicle and looking to pivot to an EV. It helps that I don’t drive much and work from home but I’m certain that my wife would prefer to drive the EV to and from work rather than her hybrid.
Yeah, my friends are complaining about $50 a week for gas and I’m around $40 a month for electricity.
Here, it’s like 200€ to 30€ a month if you can charge home. That buys a lot of depreciation.
The insurance is a lot higher though, so that eats a lot of the benefits.
Not if you aren’t diving a Tesla. My 2023 Nissan is only 20% more than my 2017 Kia.
In the context of OP, depreciation means that a “$50K when new” car may only be worth ~$35K if you choose to buy it 1-2 years later.
So it’s not so much about it’s residual value at any point in time, but rather how EVs tend to have a steeper depreciation curve at the beginning - making lightly used models a more attractive bargain.
It matters if you are in a collision for the payout.
What a weird and useless metric to think of when buying a new car. They will pay you just less then the cost of a replacement, so why does buying a car with a higher book value mean anything? Like are you just picturing yourself in an crash when looking at cars?
This is like asking whether you would like more money and saying no. It’s also troubling some people have already forgotten the lessons of the 2008 financial crisis.
Cars crash; 6 million crash annually in the United States. They get sold. If you finance a vehicle, it may not be on your schedule. Loans are based on income, not residuals. Lose the income and the residuals are all that prevent negative equity. Crash the car and you may end up with a loan but no car.
If you are so high income or wealthy it doesn’t matter, congratulations. Otherwise, naivete is not a great financial strategy with tens of thousands of dollars.
Its like spending more money on a depreciating asset with the assumption of crashing it and needing the value to be high. Its the weirdest financial choice since the 2008 financial crisis. Hell like the 2008 crisis this is borrowing in such a stupid way that you are expecting failure.
People can not afford new cars, at all. Financing a car is always a losing proposition. And buying a car based off its potential payout in the future is very very odd. Even at 6 million crashed a year in the us, there are 297.5 million registered vehicles there as well. That is a 1/50 chance to have your car in a crash if you are average, and since I know of people who are crashing every year or two the mean driver should be above that. Are you crashing a car more? We are talking about a expected 20ish year lifespan of a car with those numbers, why are you acting like people are naive for not buying into this odd view?
If you are not a car salesman, maybe you should talk to less of them in your life? Since this sounds a lot like the sort of crazy koolade passed out at a consumer cult.
Just because an asset depreciates does not mean there is not value in a reduced rate.
The only value you are talking about is the book value, that all cars tend to lose over time making the whole idea of shopping with that in mind strange and pointless.