While when the 3rd year kicks in, the decrease becomes 20%. Your new car will drop 30-40% in value after the first 2 years. If you'll notice, the depreciation is non-linear. When your car turns 4 years old, the value drops to 49% and by year 5, it drops to 40%. This goes on and on that by the time your car reaches 3 years old it will only be worth 58% of the original price. After a year, your new car would only cost around 80% of what you originally paid for it. Once you take a new car out of the dealership and drive it around the block, its value has already dropped to 90%. What is the depreciation curve?Īmong all other assets a person can own, vehicles are the fastest to depreciate. Depreciation doesn't happen in a straight line but in a curve instead. As time flies by, the 3-year old car gets older and also depreciates in value. In this case, let's take a 3-year old car from Mitsubishi Philippines as an example and say that it's definitely less valuable than the brand new car that's parked in the dealership. Depreciation is a normal process that happens wherein a property (home, vehicle, etc.) decreases in value.
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