When purchasing a new or used car it is very important to understand how depreciation works. Depreciation is the decline in a vehicle's value from the time purchase was made.

How does depreciation work?
A car starts to depreciate as soon as you drive it out of the dealer's lot. How? When you by a new car, you are paying the retail price of the vehicle. The instant you drive away from the dealership, the value of the car becomes wholesale. Meaning, if you were to try and sell your car back to the dealer, you would only be entitled to the wholesale price.

In fact, a car loses 15 percent to 20 percent of its worth every year. For example, a one year old car is valued at 80 to 85 percent of its new car value. A two year old car is valued at approximately 80 to 85 percent of the one year value. Suppose you own a car whose new car purchase price was $15,000. After one year, this car will be valued at around $12,750. After two years, this car will be worth approximately $10,837.

Is there anything that I can do to absorb the impact of depreciation?
Leaving a down payment will help diminish the shock of depreciation.

New car buyers need to analyze their plan before buying!
If you are buying a new car you need to consider if you are going to be selling your car after a few years. If this is the case, then you want to look to purchase a vehicle whose depreciation value is slow. You can visit Kelley Blue Book to find a car that is right for your needs.

Used car buyers can benefit from depreciation!
If you are in the market for a used car, you must always take a car's depreciation into consideration if you want to get the best deal on your purchase!

Below are some helpful tips that will help you get a good deal on a used car.

Research!
If you want to buy a specific make and model of used car, at the price you desire, you are going to have to do your research. We recommend you visit Kelley Blue Book to get a good handle on what the value of the car you are interested in. But remember, no two pre-owned cars are the same, therefore their prices are not going to be the same.

Car prices also differ by region. Meaning, what you pay in one city may not be the same as another. So, if you are willing to travel, you may get a better deal. Visit online classified sites like AutoTrader.com or Cars.com to get a good idea of what the asking prices for used cars in your area are.

Different makes and models of cars depreciate slower than others. For example, Mercedes, Lexus and Toyota depreciate slower than Scions and Fords.

A car's condition will also effect depreciation values. If a car is poor condition, it is obviously going to be worth less than a car in a better state. For example, you will pay more for an older model car that has low-mileage and minimal dents and scratches than for a newer car that is all banged up.

You may also want to consider buying a certified pre-owned car. A certified pre-owned car offers the consumer protection against mechanical defects and failures.

Apply for financing before you got to the dealership!
Premier Auto Financing offers great rates on used car loans. Don't rely on the dealership you are purchasing from for your financing. In all likelihood, the interest rate for the loan from a dealer is going to be much higher than Premier Auto Financing. We also suggest that you learn how to negotiate before you enter the dealership. Familiarizing yourself with dealership terms is also a good idea.

Apply for an auto loan now!

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