DEPRECIATION-THE SILENT KILLER
- This silent killer is by far your worst enemy when it comes to car buying. This a force that cannot be seen, but it can have a serious impact on your wallet and your bank account. That is what makes it so deadly. Most buyers never see it coming until it is too late. Let’s face it, there is “no money in owning cars, there is only money in selling them” and the smart buyers understand this concept. All car and trucks depreciate at a certain level, however, some depreciate at a highly accelerated pace(highline cars especially), and can have a disastrous effect down the road when you attempt to sell or trade the vehicle. If you did not put down enough of a downpayment, or you have stretched the financing term, then you could find yourself in a terrible situation of owing far more on the car than what it is worth. This is known as “negative equity” or being “upside down” in the business and is a very common problem these days. Most people put minimum down and finance for too long to keep the payments manageable, but this is a big mistake, especially if you are purchasing a car or truck with a very high depreciation curve. This is normally a larger problem for new cars, but it can also happen with preowned cars. Consumers normally compound this problem by “biting the bullet” and rolling the negative equity to another loan and add to the problem. This leads to a situation that a few cars down the road is inescapable without a serious cash influx to level the playing field again. In my experience, this never happens, and the person is stuck with the car or truck that is usually not worth anywhere near what the payoff is for the vehicle. The term used for this situation is “buried” meaning there is no escape and the customer will be told there is nothing we can do. If you take a hard look at this concept and fully understand it, I promise you that it will save you thousands of dollars in hard earned money. If you are looking at cars or trucks that are within five years of age, a great resource is Edmunds.com True Cost of Ownership tool which evaluates vehicles for several categories, and one of them is depreciation. This can be invaluable when comparing multiple vehicles and will give you a clearer picture of what to expect in the future. I cannot stress how important it is to take this wallet killer seriously, and take precautions to limit your exposure to its effects.