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/

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

"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."


Show Bankrate's community sharing policy
          Connect with us


Tara Baukus Mello

Beware of car thieves in costume on Halloween

The National Insurance Crime Bureau (NICB) has found there is a spike in car thefts on Halloween.  ... Read more

Connect with us