Reliability and Depreciation: Two Top Factors to Consider When Buying Used

September 16th, 2010

Land Rover for saleFor most of us, buying a used car is making a big leap of faith. We know what we want, how much we have to spend, and we do a little research online (maybe) before checking out the market.

Most buyers are influenced by all kinds of want-and-need factors—so much so that it’s easy to overlook the two most practical, dollars-and-cents factors in buying a car: How reliable will it be? And how much will it depreciate?

Those things aren’t always easy to determine, so we punt. I’ve done it too many times. Land Rovers and certain sports cars are fun to own, and it’s easy to discount the hours and dollars you’ll spend when they are in the shop. When you go to sell them—well, that’s maybe three years down the road, and you don’t worry about the hit you’ll take.

From Consumer Reports: ownership costs over 5 years, 300 vehicle sample

But the people who buy Hondas and Toyotas are usually more prone to think about such things, because they are buying transportation, not fun or cachet. The perceived desirability of any used car determines depreciation, in large part. And depreciation is by far your biggest vehicle expense.

To figure depreciation, you divide the value of the car by its useful life. The details are here. A simple way to determine a car’s trade-in value, hence its depreciation over time, is our CarGurus’ DealFinder, which gives you an accurate picture of local market values. Stay tuned to the CarGurus blog for more information on depreciation.

Average car depreciation runs around 46 percent over five years, according to Consumer Reports, but will vary tremendously by model and brand. For instance, a lot of people are looking to buy two-year-old Hondas because they are reliable, so the used price stays high.

That’s the other big factor in buying used—reliability, sometimes called dependability. J.D. Power does a well-respected reliability survey each year, listing the top three vehicles in 19 market segments. Edmunds and Consumer Reports also give car reliability ratings. These are for new cars, but ratings for used cars can be found on their respective websites. CR runs an April feature on “Best and Worst Used Cars.”

Reliability is sometimes a tricky thing to figure, so read the fine print in these studies. If you really want to get into the research weeds, TrueDelta is a great site for all kinds of car info, but especially reliability. You can join free if you’re willing to contribute data on your present car or buy a subscription.

Do you consider depreciation and reliability factors when shopping for a used car? To what extent are these important for you?

—jgoods

Find Used Cars in Your Area at CarGurus

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