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AAA Study Indicates Depreciation is Highest Cost for New Vehicle Ownership

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Money Car KeyA recent study from AAA confirmed that auto depreciation is the top expense new car owners face. This cost comprises nearly 40 percent of the total cost of new vehicle ownership. That translates to owners paying more than $3,000 each year. The data also indicated that sedans had a higher depreciation rate than other segments such as SUV, pickup truck, electric and hybrid. Depreciation costs for sedans are 13-percent higher than last year.

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Potential ways to minimize depreciation

Due to the growing popularity of eco-friendly vehicles, electric and hybrid models are starting to have a lower depreciation value. Consumers who desire a new vehicle should consider a model from either of these categories, to help offset depreciation costs.

Leasing might be a more affordable option, as  AAA’s managing director of Automotive Engineering and Repair, John Nielsen, articulates. “Car owners that like to change vehicles frequently should be thinking about the resale value — not just the purchase price — when choosing their next ride.”

However, high depreciation rates also impact leasing. That’s because lease payments are partially based on the vehicle’s estimated residual value at the end of the lease term. Even if you get a great discount on a lease, it’s wise to research the current depreciation rate for that particular model before making a commitment. Failing to do so could result in pricey monthly payments.

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Concluding thoughts

So, what’s the best way to keep depreciation costs as low as possible, when financing your next ride? “Keep your car for a long time and keep it well-maintained or even consider buying a quality, pre-owned vehicle,” said Nielson.

Though, if you do decide to go with an all-new auto, AAA does suggest a couple of ways to reduce ownership expenses. Drive more slowly when gas prices are high, to conserve fuel. And opt for cheaper fuel rather than buying premium grade.

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News Sources: AAA, WKBW