Sometimes there arises a situation when the item you bought by borrowing (generally a car or house), is worth much less than the money you owe. This may happen due to fluctuations in market situation or due to depreciation of the item.

Sadly, we cannot individually fight recession or pathetic financial conditions, but we definitely can avoid depreciation of the purchased item. I will help you to do it.

Commonly, depreciation depends on market demand of a particular product. If the product soon becomes obsolete, depreciation is inevitable. On the other hand, high demand can avoid downgrading. There are carmakers like Ferrari, which are known for cautiously choosing their procurer and limiting the number of manufactured models to keep the demand high in the market. Such cars don’t seem to depreciate quickly and one can expect a good resale value.

However, if you are not a Ferrari owner, you will need some of the few tips mentioned below:

Know about the depreciation of your car

Now, how the heck can you do that?

You can measure the depreciation of a new car with following points:

• New Car against Used ones
  It is a well known fact that the value of a new car depreciates very quickly as soon as it’s out of the showroom. Generally, in the first year, a new car losses around 20% of its real value. Hence, to avoid such massive loss in value, many buyers purchase a car that’s used but quite new or models older than a year or two.
• Fuel Economy
  One of the most significant depreciation gauging tools is the mileage of your car. Buyers are now shifting their focus to diesel cars and smaller cars due to their fuel economy.
• Bargain Prices
  You must have noted that some cars get a good value, according to the market, at the end of the year. This is because the vendors try their best to sell the unpopular models to vacate their inventory. If these many models aren’t sold, leaving behind a huge unsold inventory, it’s more likely that the prices of those models and brand will face low price tag in the coming year.
• Top Value Losers
  Recently, CarsGuide in Australia came up with a list of cars the depreciated quickly. Topping the list, Ford Falcon loses around 52.1% of its real value by the end of initial two years. Companies like Edmunds also publish such information in US.It was also noted that bigger, longer cars generally consume more gas per mile than small cars. Hence, they lose more value. In the interim, Honda Civic Hybrid loses just 12% of its value at the end of two years, making it least depreciable car available.

Study Thoroughly

Calculating depreciating isn’t much hard, but the figures might be disappointing. The calculation is done something like this:

If you purchase a car for $30,000 and sell it for $24,000 after 3 years, the overall cost of having a car is $2000 per year + gasoline, repairs, maintenance, and other expenses.

If you purchase a car for $30,000 and sell it for 18,000 after 3 years, the over all cost you is $4000 per year + gasoline, repairs, maintenance, and other expenses.

Hence, depreciation should be a major factor affecting your buying decision except you decide to drive you vehicle until it bursts.