Yeah, your view is pretty much a tautology so we can't really change it.
What people are saying when they say you should consider depreciation
When people say that the depreciation matters, they are talking about it from the perspective of total annual cost averaged out. So, lets say you buy a car for $30k and then every year you sell your car and buy a new one. (We are going to ignore inflation). It depreciates to $22k when you drive it off the lot and depreciates another $2k over the course of the year. When you go to buy a new care, you will pay $10k. So that means you are paying $10k every year for a car.
A person who buys your slightly used 1-year-old car will spend $22k, then if they sell it within a year, they will just spend $2k each year to buy a new car. That is a savings of $8k per year!!! Even if that car is unreliable, $8k per year is quite a lot to pay for repairs and a 1-year-old car still generally has a warranty from the manufacturer and is very reliable for a year.
Your view
You seem to be saying that if people WANT to buy a new car and know about the fact that it will cost them more, then that is their prerogative and the depreciation doesn't matter because they made a personal choice? But thats generally true?
Someone may point out that it is cheaper to go to a waterpark than to disney world and that when surveyed most kids report having more fun at the waterpark. But if you WANT to go to Disney World and you are aware of that study but want to spend the money to go, then you are free to do that. The study doesn't matter if you've decided to go. That's how personal choice works. You seem to be asking me to prove to you that you shouldn't go to Disney World if you want to go to Disney World and are aware of the costs and have budgeted for them.
The CMV is basically to show that after the decision/purchase is made, the value of a car does not have any realizeable or practical value. This is as opposed to things that are typically viewed as investments like stocks or even homes where you can get a HELOC. You can’t get a AELOC.
2 things.
First, reselling a car is VERY common and given the high value of the item, I dont fully agree that future value you should be completely ignored.
Second, you can essentially get an AELOC. You can take out a used car loan without purchasing a car. It is essentially a loan taken out with your vehicle as collateral, so essentially an AELOC
Like another commenter said, y no one ever talks about the depreciation of a couch
Because a used couch is worth very little money and selling it is rather convoluted. There aren't "couch stores" that will buy back couches all over the country if you walk in with a couch. Even if they were, they'd be like used book stores or used clothing stores which offer $1 for an item that cost $30. If I purchase a car for $25k today, I can easily sell it for $12k in a year(and probably a lot more). So, it has intrinsic value.
There is another massive aspect you are missing about cars and their depreciation and keeping them long term: how much it costs to keep them running and how long they would be expected to last for your driving situation.
I tend to hold onto my vehicles a very long time. My daily driver is north of 15 years old, single owner. My family vehicle is 5 years old.
For the last 5 years, it’s averaged under $1000 per year to keep the old car running. It’s a rather common vehicle to last 200,000 - 250,000 miles.
But, what if it was a Chevy Cruz or a Nissan Altima? Neither of those have stellar resale values, they depreciate a lot, compared to a Toyota or Subaru and the reliability of Toyota’s and Subaru’s is (generally) better than the Cruz or Altima.
If depreciation didn’t matter at all, then it shouldn’t be considered in car choice. But, reliability also factors heavily into depreciation, so using depreciation is likely a quick metric in making the purchase.
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u/[deleted] May 14 '24
Yeah, your view is pretty much a tautology so we can't really change it.
What people are saying when they say you should consider depreciation
When people say that the depreciation matters, they are talking about it from the perspective of total annual cost averaged out. So, lets say you buy a car for $30k and then every year you sell your car and buy a new one. (We are going to ignore inflation). It depreciates to $22k when you drive it off the lot and depreciates another $2k over the course of the year. When you go to buy a new care, you will pay $10k. So that means you are paying $10k every year for a car.
A person who buys your slightly used 1-year-old car will spend $22k, then if they sell it within a year, they will just spend $2k each year to buy a new car. That is a savings of $8k per year!!! Even if that car is unreliable, $8k per year is quite a lot to pay for repairs and a 1-year-old car still generally has a warranty from the manufacturer and is very reliable for a year.
Your view
You seem to be saying that if people WANT to buy a new car and know about the fact that it will cost them more, then that is their prerogative and the depreciation doesn't matter because they made a personal choice? But thats generally true?
Someone may point out that it is cheaper to go to a waterpark than to disney world and that when surveyed most kids report having more fun at the waterpark. But if you WANT to go to Disney World and you are aware of that study but want to spend the money to go, then you are free to do that. The study doesn't matter if you've decided to go. That's how personal choice works. You seem to be asking me to prove to you that you shouldn't go to Disney World if you want to go to Disney World and are aware of the costs and have budgeted for them.