You’ve probably heard over the years a number of tips or myths regarding the value of your car. They might involve how quickly a new vehicle depreciates, for instance, or the biggest factor that influences the value of your used vehicle.
But are they true, especially this year because of new pandemic-related market trends? Edmunds’ experts analyzed the most popular car value myths to find the truth behind them.
Car value true and false
New cars lose 20% of their value the moment they drive off the lot
True. “The first hit on the car is basically immediate,” said Richard Arca, director of vehicle valuations and analytics for Edmunds.
If you traded in your vehicle within a week or so, you’re losing the sales tax and fees you paid on the car — about 11%.
Plus, the dealership will offer you less since the car is no longer new and it needs to make a profit on the sale.
That will lead to a further drop of 8%-10%, Arca said.
Ultimately, the dealership will plan to sell it for around 4% less than what a new one would go for, he added.
On average, a new vehicle depreciates by 30.5% in its first year, 7.7% in the second and 6.8% in the third year, according to Edmunds data.
This depreciation figure is an average among all brands, but as a general rule, luxury vehicles will depreciate faster, while vehicles with higher resale value (a Toyota Tacoma, for example) will be closer to 20% in the first year.
Wait until the end of year to maximize car’s value
True and false. The end of the year sales might be the best time for buying a new car, but the trade-in numbers favor a different time of year. Values tend to be higher in the first two quarters of the year, with larger drops in the final two quarters.
There are more buyers in the market early in the year, and dealerships need more cars to feed the demand. Also, a used car feels more new when it is eight or 10 months away from turning a model year older rather than just two or four months away. These are good things to keep in mind when you’re looking to either time your trade-in or negotiate with a salesperson in March instead of October.
That said, 2020 is an exception because we’ve seen an upward curve in used car values. Now really is the best time to maximize your car’s value if you plan on trading it in.
Number of miles driven has the biggest effect on a vehicle’s trade-in value
False. The truth is there is no magic number. Mileage does play a role in a vehicle’s value, but not as much as you might think. As a general rule, the value of your vehicle will drop slightly with every 10,000 miles you add. But according to Edmunds data, there is no major drop-off at any certain milestone. Even the infamous 100,000-mile mark is not a value-killer as long as the vehicle is in good shape.
What matters more to a dealership? The model year. Your vehicle is likely to retain 60% to 70% of its original value if it is only a few years old. This remains true even if you racked up the miles. Cars that are more than 5 years old are less likely to reach those figures, even if you went easy on the miles. The condition of your car does matter. If your older car is in good shape, it will retain value — dealers can often resell older vehicles much more quickly than newer ones. But when it comes to getting the most money for your trade-in, newer is better.
Buying out your lease is a bad value
False. Some experts will tell you not to buy your lease at the end of the term for a number of reasons. The price is often non-negotiable, the prices can be sometimes out of touch with the market, and none of your lease payments have counted toward this purchase. But here’s why you should reconsider.
This year’s market has been thrown off due to the pandemic and used car prices remain high. Your lease may be a bargain compared to what the same car might cost at the dealership. And there’s no research to be done on the car. You should already know if you love it and you know its history since you are the first owner. This takes away much of the guesswork with finding a used car.
Keep less-driven vehicles in top shape
Amid the virus pandemic, Americans aren’t driving as much. Here's a list of tips to keep vehicles in shape even if they’re being driven less.
Fill up your gas tank
If you will not be using your car for more than 30 days, it’s important to fill up your gas tank. This may help prevent moisture from building up in the tank.
You could also consider adding a fuel stabilizer to the tank when it’s almost full, as the shelf life of standard fuels is only about three months. If your vehicle won’t be used for a few months, it may help keep the fuel lines and engine from corroding.
Protect the battery
Don’t forget the vehicle’s power source: the battery. The battery will eventually lose its charge if it isn’t driven at least every few weeks. If you prepare the car properly for storage, though, you do not need to run it to keep the battery charged.
Consider connecting the battery to a trickle charger or battery tender with an automatic shut-off feature or float mode. This will ensure the battery doesn’t get overcharged. The battery can remain in the vehicle or be removed while it’s hooked up to the battery tender.
Change the oil
It’s not just about miles: If you don’t drive your car a lot, your oil still needs to be kept fresh. Even if you drive fewer miles each year than your automaker suggests changing the oil (say, 6,000 miles, with suggested oil-change intervals at 7,500 miles), you should still be getting that oil changed twice a year.
Oil becomes less effective as it ages, and by not getting the engine warm enough, excess moisture that forms in the engine will not be removed, which can lead to shorter engine life.
Inflate your tires
If your car will be sitting for a long period of time, the temperature may change and the tires can slowly lose pressure. For this reason, it’s a good idea to inflate your tires to the recommended air pressure, but do not exceed the maximum.
You’ll want to repeat this process when you take the vehicle out of storage.
Top off fluids
If you leave your car dormant for an extended period of time, top off your vehicle’s fluids — such as brake fluid, engine coolant, power steering fluid (if applicable), transmission fluid, antifreeze and windshield wiper fluid. Also, consider changing the oil before you let your vehicle sit in storage for more than a couple of weeks. Take the car for a short drive, as this will help circulate the fluids, including the fuel stabilizer.
Take periodic drives
Occasionally driving your vehicle around the block will help keep the battery charged and in good health. It will also prevent rust from building up on the rotors, which if left unchecked could cause irreversible damage and will also prevent the tires from flat spotting. Flat spotting is when the rubber degrades quicker in one spot due to compression, which will cause an incurable vibration.