If you are looking to purchase a new car, you need to have a firm grasp on how car depreciation works. Knowing how your car will depreciate over time will go a long way towards helping you accurately project resale value and assist you in making informed decisions when you compare car finance options in Burleigh Heads.
An understanding of car depreciation is also important for determining what kind of value you will get when selling an old car or trading it in. You can use this car finance calculator to help you with your car loan calculations.
Let’s take a look at how you can calculate depreciation.
Determine the Initial Cost
The first thing you need to do is determine the original purchase price of the car, including taxes and fees.
Determine the Car’s Age
Before you can calculate depreciation, you need to know how long you have owned the car or how long you will have owned it by the time you sell it. Depreciation typically occurs annually, so this will be a key factor in your calculations.
Determine the Annual Depreciation Rate
Depending on the car you own, it might depreciate at a different rate. Research the annual depreciation rate for your specific vehicle.
Research the Current Market Value
Find out the current market value of your car based on factors like make, model, year, mileage and condition. Various websites can provide estimates, but remember that these are not necessarily accurate.
Do the Calculations
Use the formula for straight-line depreciation to estimate your car’s depreciation over time.
The formula is: Depreciation = (Initial cost – Residual value) / Useful life.
Make Adjustments When Necessary
Factors like mileage, condition and market demand can affect the rate of depreciation. A low mileage or well-maintained car may depreciate more slowly, while the opposite is true for high mileage or unmaintained cars.
Contact iCREDIT for help comparing car finance options in Burleigh Heads. Regardless of your car’s depreciation rate, we will ensure that you get the best possible trade-in value to reduce the loan amount you require.