Why isn’t it treated similarly to a house?
In: 111
Cars break over time.
So do houses.
When you buy a house, you also buy the land it’s on. When the house is eventually broken, you still own the land.
There is only so much land on Earth.
We keep making more people. Less land for every person.
More people want land. The people with the most money get the land. Land costs more money.
A house goes up in price over time because of land. A car goes down in price over time because it breaks and eventually is worthless.
They make new cars all the time. They don’t make new land all the time. That’s why land value goes up, and car value goes down.
Cars are infinite. They really have no value. It’s just melted rock over and over. But that land that house sits on. Very valuable. There’s only so much usable land which a person can survive on. As population increases. The value of land moved up. Land is a very finite resource. A car is not.
houses do depreciate – the structure depreciates and in theory the land appreciates (because there is no more)
cars depreciate because they are continually making them – would you buy a used car for the same price as new?
A big part of that is the wholesale vs. retail value. Let’s say a new car is $40k. So a used car, even one with 10mi. on it, would sell for less than new, otherwise one would just buy new. And the dealer needs to buy the car for enough less than they can sell it for to cover any repairs, cleaning, administrative costs, salesman’s commissions when they sell it. So even if the used could sell for $39k, the dealership would only buy on trade for, say, $35k.
Houses are different because you can’t build more land in specific places, but carmakers can always build more cars and sell them wherever there is demand.
Imagine you are in the market to buy a car. Let’s say the car you want to buy is $40k MSRP. How much would you pay for an identical but slightly used one? Probably a lot less than $40k otherwise you’d buy the brand new one.
The moment you drive a car off the lot, it becomes secondhand. It’s a used car then. Its value goes down in that instant, and continues to go down as you drive it because things wear out with use, and cost money to replace or repair. The more you use a car, the closer it comes to its next expensive repair or maintenance, and the value of the car lowers accordingly as you get nearer to those expenses.
Houses can depreciate too. We’re just accustomed to housing prices going up, but there isn’t any rule saying this has to be the case.
Everything depreciates over time, even metal like gold, silver, etc. 90% of the time it’s wear and tear.
The dealers cannot say a car is brand new or like brand new for sure after it’s left the lot because they have no idea what you did with or in it.
As far as they know you took it off road hard, has sex in it, did lines of cocaine off the back seat, then took it to a car wash to rinse the hooker blood out of the trunk.
The value of anything according to the market is approximately how much people are willing to pay for it. People are willing to pay quite a bit more for a totally new car than a used car, even if that used car has barely been driven at all, because people like feeling sure about what they’re going to get.
Depreciation is based on how much others are willing to buy the car. The moment you drive it off the lot, it is no longer a new car from buyer perspective.
Latest Answers