How Do Reliability Ratings and Depreciation Rates Factor into the Used Car Buying Process?
Of course, buying a used car does you no good if you end up with something a little less than reliable. Let's look at the various factors you should consider from this standpoint when you're buying a used car.
The Overall Reliability of the Vehicle Make and Model
Admittedly, when you are buying a used car it can be next to impossible to guarantee reliability. Regardless of how thoroughly you inspect the vehicle or how many vehicle history reports you have access to, you can never be completely guaranteed that you are purchasing a car that is headache free. This, however, does not mean that you are unable to make some pretty good guesses based on the history of the vehicle's reliably. Both ConsumerReport.org and J.DPower.com offer some quick insights into a specific model’s history of reliability. By using these tools to compare models, you will be able to avoid models that are notorious for letting people down.
The Vehicle Depreciation Rate
Did you know that the average new car loses between 40 to 60 percent of its value within the first three years of purchase? For example, the average depreciation on a $30,500 vehicle leaves somewhere around $17,500 after three years. Now compare that to later model vehicles, which on average only lose about twenty percent of their value in years four, five and six. For example, if you waited three years to buy the $30,500 car we referenced above, you could probably purchase it for somewhere around $16,000. Then over the next three years, the vehicle would depreciate at around a 20% rate, meaning you would only lose about $3,500 – which is significantly less than the $17,500 loss in the example above. However, it is important to keep in mind that not all vehicles depreciate at the same rate. In fact, according to MSN, the 2004 BMW 3-Series held its value surprisingly well – only losing about 25% of its value after the initial 36 months. So when deciding on which used car to buy, make sure you research the vehicle’s history of depreciation. This will offer some insight on how much value you will lose down the road.