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In most cases, the value of your vehicle depreciates over time. The first few years of a new vehicle are generally when the amount of depreciation is the greatest.
For example, if you buy a $15,000 vehicle, the blue-book value a year later may be $12,000 for a decline of $3,000 in book value. In the second year, the decline in book value may be $2,500 and, in the third year, $2,000.
Some makes and models of vehicles depreciate faster than others. Generally, luxury vehicles depreciate at a slower rate than economy vehicles. For example, a luxury auto that costs $40,000 may depreciate by $10,000, or 25%, over its first five years. An economy auto that costs $15,000 may depreciate by $5,000, or 33%, over the first five years. The depreciation rate is faster for the economy vehicle.
Use this calculator to estimate the depreciation expense of your vehicle over the time you own it. The difference in purchase price and total depreciation is approximately equal to the resale value of your vehicle.
Some vehicles may actually increase in value, or appreciate. A limited-edition vehicle for example, or one that features a popular design that is no longer made may be worth more in the future than it is today. A vehicle or other asset that appreciates over time is called a collectible.
It's not always easy to figure out which vehicles are going to be regarded as collectibles. Often, popular tastes or fads can influence future collectibles. Nevertheless, certain vehicle collectibles tend to have a history of retaining their value over the years: 1964-1/2 Ford Mustangs or '55 Corvettes, for example.
A good way to learn more about vehicle collectibles is to visit the Web site of your vehicle maker. Auto shows also include collectibles in their exhibits of newfangled designs.
Owning a collectible may change the cost of ownership. You will likely pay a higher insurance premium and will pay more for hard-to-get parts. Since no two collectibles are exactly alike, it can be difficult to determine the value of a collectible. As a result, it may be a good idea to have a collectible appraised from time to time. (Your insurer will likely require an appraisal too.)