Cost Considerations: Depreciation, Financing, and True Ownership Costs

 Owning a car comes with more than the sticker price. Let’s break down depreciation, financing, and recurring ownership costs so you can make informed decisions.

1. Depreciation Dynamics

  • Traditionally, a new car loses about 15–20% of its value annually, often up to 30% in the first year Wikipedia.

  • Interestingly, due to recent shortages, certain vehicles have even appreciated in value right after purchase—reversing long-standing trends Wikipedia.

2. Loan Terms and Interest Rates

  • Used car buyers typically face higher interest rates—often around 11.62%, compared to 6.35% for new vehicles MarketWatch.

  • Many buyers now opt for longer loan terms (72–84 months) to reduce monthly payments, but these lead to higher total interest, negative equity, and extended ownership of a depreciating asset The Washington Post.

3. Owning vs. Buying Strategy

  • The American Automobile Association (AAA) reported (though in 2019) that annual vehicle costs—including depreciation, finance charges, insurance, maintenance, and fuel—could total around $9,282 per year (about $773 per month) Reddit.

  • Modern buyers weigh comfort, safety features, and mobility needs. For some, repairing a paid-off car may outweigh financing a new one, unless advanced safety and convenience justify the debt

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