auto

Should you ever buy a new car?

Depreciation takes bite out of new car's value
Depreciation takes bite out of new car's value © Camphotos/Shutterstock.com

Depreciation is one of the biggest expenses of owning a car. On average, a car loses 15 percent to 25 percent of its value each year for the first five years, according to Edmunds.com.

"When you step into a new car, it's almost like you buy new depreciation," Reed says.

Making pricey modifications to your car doesn't help, either. Options depreciate very quickly, so that $2,000 navigation system you bought four or five years ago when the car was brand new is not adding any value to the vehicle, Reed says.

"It's a depreciating asset. So, the less money you put into it, the better," Reed says. A better idea is to put that money into real estate or some other asset that will gain value.

The good news is that once a car is 5 to 7 years old, it's lost most of the value it's going to lose. So, as long as you're getting reliable transportation out of it, it's a good idea to keep that car for as long you can, Reed says. "Cars will always be worth something if they run."

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