Deflation in cars

[Deleted]

What is the rate for deflation in a car, on average. I am specifically looking at toyotas. The car I have is a 2003.

[zibazinski]

I have a 2005 XLE with 60k on it. I paid 22,500 4 it plus tax so say 25k. Depending on what you look at (and even Toyota offered me 17k) I'm at 18-21k.

[tskeeter]

gin, there isn't a simple answer to your question. It depends on what model car you're talking about (we have a 2007 minivan and a 2007 Jeep, nearly identical purchase prices, and similar mileage and condition. The Jeep is worth twice as much as the minivan.), the condition of the car, the mileage on the car, where the car is located, who the buyer is (private party sale vs. trade in), and a bunch of other stuff.

There is a simple way to get an answer to your question, though. Use one of the internet car web sites. The mathematical models they use take the important variables into account, and they have tools to help you figure out things like what condition your car is in. My personal favorite for estimating the resale value of a car is kbb.com (Kelly Blue Book). I think their algorithm is the most accurate and I like their car condition questionnaire.

[runewell]

You mean depreciation?

[Deleted]

Roughly assume that a car's useful life is 6 years. Divide new value by six years for the amount of deflation per year.

[Deleted]

Jun 7, 2011 10:54:47 GMT -5 runewell said:

You mean depreciation?

Oh, runewell, I can't believe I did that. I'm doing two things a once. I'm embarrassed now.

[Gardening Grandma]

I knew you meant depreciation.

What I do is run through the numbers at edmunds.com and kbb.con and use the average.

For example, our 2000 Toyota RAV4 is currently worth about $5000. We paid $12000 for it in 2003 so we've had it depreciate about $7000 over 8 years. Roughly about $1000/yr.

[dividend]

Jun 7, 2011 10:54:50 GMT -5 ArchietheDragon said:

Roughly assume that a car's useful life is 6 years. Divide new value by six years for the amount of deflation per year.

6 years seems like a low estimate of a car's useful lifespan. I would bet the average is closer to 10. And a car also doesn't linearly depreciate, either.

[Deleted]

Roughly.

[phil5185]

Roughly assume that a car's useful life is 6 years.

Oh oh - you won't tell my 11 yr old truck, will you?

[Gardening Grandma]

Jun 7, 2011 15:11:35 GMT -5 phil5185 said:

Roughly assume that a car's useful life is 6 years.

Oh oh - you won't tell my 11 yr old truck, will you?

Or my 2000 RAV4?

[Deleted]

Roughly

[bean29]

Well, I agree with Archie,

Most car loans are for 6 years, so if you finance it, you assume it will be worth 0 when you pay it off, they if you keep driving it past that point, you are on bonus miles. My 2003 Ford Windstar is on bonus miles. 127,000 miles hope to drive it at least 2 more years. It is worth somewhere between 4,000 wholesale and 7,000 retail. I always figure it is worth wholesale. I never assume I will get retail for a car.

I gave my last van away when I got to the bonus mile point...now I figure I am going to use up the bonus miles myself.

ETA: I would much rather be driving a small SUV - but that would cost me new 21,000+. My van has lots of bells and whistles so I am going to drive it for a few more years. I could not get as nice a car as I have now for 4,000-7,000 so I would rather keep it. We paid 2,000 to have the transmission rebuilt last year. I think it was well worth it.

[thyme4change]

www.kbb.com

www.cars.com

www.edmunds.com

www.nadaguides.com

[runewell]

Just because a car loan is for six years, that does not make the useful life of a car six years. I paid cash for my new 2007 Honda Accord, does that mean all its miles have been "bonus miles" (which I think is a silly concept). The sad truth is a 6yr old Japanese car is just as good as a 2-yr old American car, so the type of car and how it is driven factors into its useful life.

[formerexpat]

What is the rate for deflation in a car, on average.

About 1 Pound per Square Inch per month, on average.

Oh wait, you weren't talking about car tire deflation?

[midjd]

This thread worries me, our newest vehicle is a 1997... I guess we purchased all our vehicles on bonus miles

If you don't mind a slight hijack (sorry gin!), is there ever a point when a car bottoms out in value? Around the $1K mark, possibly? The KBB value of our vehicles hasn't changed much since we purchased them, but I notice that KBB won't value cars older than 20 years. At that point, is the car just worth whatever you could reasonably get out of it? Around here it seems any vehicle in decent running shape goes for at least $2K, but I know they can book for much less.

[DVM gone riding]

between the first year I owned my car 2008 Subaru purchased used in 2009 the price I bought it for and the NADA didn't change at all!! And once a car is old it depreciates very little. This is a reverse exponential function that is highly dependent on the model.

[DVM gone riding]

mid west I was always told if it runs its worth at least 500 to someone!!! Most cars that are drivable (ie a sane person could reasonable expect the car to run at least 10mi every day without serious issues) are worth at min 1k

[schildi]

My 5.5 year old Tacoma is listed on kbb with a trade-in value of $20,950. I paid $26,200 brand new in January of 2006. That's a loss of 20% in 5 years.
People are insane. It's not worth it to buy a used Toyota, lol. Private party value is shown as > $23K. It's crazy. Good used cars are waaayyy too expensive.

[Deleted]

Jun 7, 2011 21:10:50 GMT -5 alwaysbeoptimizing said:

You can get a more precise depreciation by either looking at what used examples of the car you are looking at or edmunds.com has a depreciation prediction for each car I think.

I cannot find where the depreciation prediction is on edmunds.

[wewillsee]

Jun 8, 2011 0:08:50 GMT -5 schildi said:

My 5.5 year old Tacoma is listed on kbb with a trade-in value of $20,950. I paid $26,200 brand new in January of 2006. That's a loss of 20% in 5 years.
People are insane. It's not worth it to buy a used Toyota, lol. Private party value is shown as > $23K. It's crazy. Good used cars are waaayyy too expensive.

Agreed.

People that gloat about buying that several year old Honda or Toyota may feel good but they would probably have done much better buying a new one. However, buying a couple year old Hyundai or Kia (or some American cars as well) may be a great deal since they depreciate so rapidly.

To the OP, if you have your heart set on buying a Toyota, look at the new ones that you like and go to edmunds.com and enter in what you want and competing dealers in your area will e-mail you quotes. You can then print them out, go to the dealer and talk to their "internet" salespeople and negotiate from there. This will save you thousands versus walking into a dealership blind.

[tskeeter]

My 5.5 year old Tacoma is listed on kbb with a trade-in value of $20,950. I paid $26,200 brand new in January of 2006. That's a loss of 20% in 5 years.
People are insane. It's not worth it to buy a used Toyota,

schildi, I'm betting your Tacoma is 4WD. Right? I took a look at used car prices on a 2006 Camry, and found that Camrys with 50K miles on them will sell for a bit less than half of new purchase price. So I don't think you're seeing a Toyota premium (although I do believe that a Toyota premium does exist).

Recently I took a look at the value of my 2007 Jeep Wrangler 4X4, with 60K miles on it. It has depreciated about 15%. This would be consistent with what I found when I was looking for a used Wrangler in late 2006. Used Wranglers with about 50K miles were selling for more than I would have to pay for a new base model Wrangler. Admittedly, the used Wranglers were the more fancy models, but a few gee gaws didn't justify the prices people were getting for half worn out vehicles. I think there is a significant price premium on used 4WD vehicles, especially those that are perceived to be more rugged than a soccer mom SUV.

I think that you are probably seeing the 4WD premium on your Tacoma, not the Toyota premium.

[schildi]

Yes, tskeeter, it's 4WD.

[Nazgul Girl]

We just sold our 1992 rusted-out Honda Civic with no muffler and 152000 miles for $700 cash this last weekend to our favorite auto repair shop. They're going to do some fixes on it and give it to a nephew. We were glad to have it out of the driveway. The blue book on it is about $ 1200 but it really wasn't worth that much. Cash is one of my favorite asset classes .

[blackcard]

It is not the years, it is the miles that make the most difference. My father is still driving his 1988 Lincoln with 125K miles on it. Looks and runs like new. Garage kept and well maintained. That would be 23 years as opposed to 6. Roughly.

[midjd]

KBB doesn't seem to care about much but the year... an older car with low miles will be cheaper than a newer car with high miles. DH's grandma has a garage-kept 91 Pontiac Sunbird with 40,000 miles - she is literally the little old lady who drives to the grocery store once a week - and it books for about $1,450. Same year, 140,000 miles, it books for $1,250. Doesn't make sense to me.

[domeasingold]

I have 73 Corvette. $6300 new. Worth 35K now. JD is right. Low mileage old cars are worth more.