Why isn’t it treated similarly to a house?
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If someone buys a car and then tries to sell it a week later, that’s weird isn’t it? Why would someone do that? Maybe something is wrong with the car, maybe they did something weird to the car. I don’t know, but I’m not paying full price for it, would you?
Because the minute you drive it off the lot, it’s not a new car anymore. Nobody is going to pay you a new car price for a used car, no matter how few miles are on it. Anyone but the dealer will assume there is something wrong with it, and the dealer can no longer sell it as new, even if they were willing to take it back.
Here’s a few reasons:
1. Houses can be repaired/upgraded at ‘reasonable’ cost back to their original quality or perhaps even better barring any sort of major foundation or settling issues. meanwhile the cost of parts for cars is often quite expensive and due to the wear and tear cars see vs houses, there’s never really a way to get a car back to “mint condition” that doesn’t cost a LOT of money and replacing most of what was original to begin with
2. supply and demand. homes last a long time compared to most cars, and most people need them while not everyone needs a car. car companies usually crank out new cars every year so they’re always readily available and not everyone needs them. Supply is high, demand is moderate so the value goes down. The housing market shifts usually and at times when supply is low, the value of houses skyrockets for people that need them.
I think in reality it’s the first year. Last years model can’t possibly be worth the same as the one on the showroom floor. I think the average American puts like 10k miles on a car every year. That’s a decent amount of wear on the tires and rest of the car. I read an article about brand new Jeeps lose about $4k value the first year then about $2k a year for a while
It’s like an open boxed item you find at the retail store. You can buy a new item for $50 but an open boxed one for $40. The open boxed one could be someone who takes it home, tear open the box and returned it but the price depreciates because someone has already “used” it and you don’t know what’s wrong.
A car is driven off the lot. That owner has used it. You don’t know what they did with it and it means it is an old item and isn’t worth as much anymore.
Well like if you were out to buy a car. And there was option to buy a completely new car, or car from some dude?
How much cheaper the car would be before you consider ‘the dude’?
I think if it would be a matter of several hundred, I would just go with brand new. The price difference should be more significant to not just buy from dealership. At least for me.
New cars generally come with the specific options the buyer wanted and was willing to pay a premium for. Used cars don’t. Also, cars don’t last long compared to houses, and that longevity changes dramatically with how the owner drives and maintains them – things that are difficult to verify.
New houses also depreciate vs used houses because whoever had it built usually doesn’t want the same things as the next guy. Why pay full price not to get what you want? BUT, since houses aren’t typically thrown away every 5-15 years, they have less availability and are typically better maintained than cars, so don’t suffer as much depreciation. Lastly, many homeowners add value-increasing things to their houses like sheds, finished basements, solar panels, landscaping, trees, new cabinets, etc vs. most car modifications adding 0 value to most owners, or even actively decreasing the value.
tl;dr: It’s much easier to get a new car than a new house, and cars are not as long-lived, so cars depreciate faster. The average house in the USA is 46 years old, but the average car is only 12 years old.
There are lots full of cars the dealer can’t sell. There are no lots full of homes realtors can’t sell.
Basically, there’s no reason to pay full price for a used car when you could just buy a new car. But there’s a lot less opportunity for a “new” house, and location might be more important than the house itself.
Houses depreciate too, but the land tends to gain value as demand increases. The land can be a significant portion of the price, so you can remodel or even build a new home. Unless a car is a one of a kind, it’s not worth repairing even minor damage after an accident.
You might buy the only house available in a neighborhood you want your kids to grow up in. You can buy a car from another state, so there’s more opportunity to shop around.
The word “depreciate” means people wouldn’t buy it for as much money. If you were buying a car and you had $20000, would you buy a $20000 car from the car dealership, or would you buy the same $20000 car but someone already bought it first and drove it? You’d be stupid if you bought the used one for the same price. So what would the used one cost if you wanted to buy it? Well maybe $17000. That’s $3000 depreciation
Its simple.
An object is only worth what someone is willing to pay for it.
I have 2 cars one thats driven and one thats new, which will YOU pay more for?
For a period after covid used cars were more expensive than new cars, simple fact you could get a used car now, and had to wait 12+ months for a new car. So the value existed in getting it now.
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