The Importance of Resale Value when Buying a New Car
If you're buying a new car, you've probably already considered the cars that meet your needs, your budget and your lifestyle.
While these are important points to ponder, there's something else you should consider when it comes to finding the best new car for you. Resale value — or the future price you can expect to receive for the car when you sell it — is an often overlooked new car buying consideration and yet, it's arguably one of the most important. In this section, we outline how resale value works, why it's important and why you should consider it when buying a new car.
The factors that influence resale valueThere are four primary factors that influence how much a car will be worth in the future, including supply and demand, the make and model of the vehicle, its condition at the time of purchase and, finally, overall market conditions.
Supply and demandTo begin, the age old law of supply and demand plays a major role in impacting a car's future value. Not only do new cars produced and sold in high volumes on dealer lots typically cost less to buy, they generally bring lower resale values than hard to get cars with limited production runs or vehicles that are in high demand by a specific subset of car buyers. Hence, cars in high supply typically always bring low demand and ultimately, lower prices.
Makes and modelsWhat's more, certain makes and models bring higher resale values than others (in some cases, much higher resale values) due to their brand perception. For example, cars that have proven themselves among car buyers — ones that are built better, offer more functionality and hold up better the older they get — usually always bring a higher price at resale time. Along those same lines, resale value can be negatively impacted if a particular model is no longer offered. While some discontinued models hold their value better than others, the possibility of lower resale values on discontinued models is something you should be aware of and keep in mind when buying a new car.
Mileageplays a key role in resale values. Based on algorithms utilized by today's leading used car price guide editors, excessive mileage can significantly decrease a car's resale value. Additionally, driving more than the average yearly limit can cause disproportionate wear and tear on a car, negatively impacting its condition, and its price, in the process. As a general rule, average yearly miles driven should fall in the 12,000 to 15,000 mile range. While mileage isn't the only thing that impacts a car's value, it's definitely an important factor.
Vehicle statusA car's condition has a huge impact on resale value — that's why many used car price guides offer condition guidelines when it comes to assessing fair market value. Condition guidelines usually range from poor to excellent, with varying criteria for each condition description. A car that looks new, is in exceptional running condition and needs no reconditioning would be considered exellent, while a car that has severe mechanical or cosmetic defects, is in deficient running condition and has sustained irreparable damage would be in poor condition.
Market statePerhaps the trickiest factor in determining resale value is assessing overall market conditions, especially because they are continuously changing. You might get a lower price for your large SUV if gas prices are skyrocketing at the time of resale. Or your sporty coupe that was all the rage when you bought it might bring a lower price if it's part of a manufacturer's recall during the time you sell it. Market conditions such as fuel prices, geography — even weather — can all play a part in determining what you car will be worth in the future.
While not exhaustive, this list is a good starting point in helping you understand the primary factors that impact a car's resale value. Your best bet is to check the used car values of the new cars you're interested in buying — from one year ago, two years ago, even five years ago, if applicable — to determine which new cars hold their value better than others.
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