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Depreciation is the predictable decline in an asset’s market value over time, and for vehicles it’s often one of the largest ownership costs. Unlike fuel or insurance, depreciation isn’t a monthly bill you pay to a vendor; it’s an economic loss reflected in lower resale proceeds when you sell or trade the car. Depreciation depends on make/model, mileage, condition, and market demand. Some cars hold value well (so-called “slow depreciators”); others lose a large share of value quickly in the first few years. When planning total cost of ownership, estimate expected depreciation over your chosen horizon (e.g., 3–5 years) and subtract the projected resale price from the sum of purchase and ownership costs to see the net cost. This insight is essential if you plan to trade frequently or sell soon after purchase.

Practical actions: research typical depreciation curves (many automotive sites and guides publish average retained value by model and year) and incorporate that into budgeting. If you lease, depreciation is effectively embedded into the lease payment — you’re paying for the expected drop in value over the lease term plus financing and fees. If you buy, minimize depreciation impact by choosing models with historically better resale, keeping documented maintenance, avoiding excessive mileage, and protecting the vehicle’s condition. Also weigh depreciation against other costs: a fuel-efficient newer car might depreciate faster but save large fuel costs for high-mileage drivers; a used car may depreciate less in percentage terms and offer lower monthly financing costs. Depreciation is an unavoidable economic reality for most vehicles, so acknowledging it makes your milestone calculations more realistic.

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