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The
Value of Cars
In
1996, a fully loaded Signature Series Lincoln Town Car
(i.e., leather interior, sunroof, etc.) cost $42,000.
In 1996, an EX Series Honda Accord cost $22,000.
Today,
the 1996 EX Series Honda Accord is worth approximately
$8,000 to $9,000. The 1996 Signature Series Lincoln
Town Car is worth somewhere in the neighborhood of $7,000
to $8,000. The Honda Accord depreciates about 50 percent
in four years, while the Lincoln Town Car depreciates
about 50 percent its first two years.
You
see, the value of a car is determined by what its value
is at the end of a certain term.
When determining value, you must keep not only depreciation
in mind but also reliability and the resale market.
Let's
continue with our previous example. At the end of a
term (around 200,000 miles), the reputation of a Honda
Accord is well known-you've probably reached that point
without a whole lot of problems. With the Lincoln Town
Car, you've more than likely had to replace a few things
along the way to get 200,000 miles out of it.
Also,
there's a bigger market for a Honda Accord at the end
of a term, whereas most of the people who buy a Lincoln
Town Car are not looking to buy a used Lincoln Town
Car-at least not one as used as a 5- or 6-year-old model.
So,
when looking at new cars, keep in mind that it's the
value of the car at the end of a term that's important-not
the price at the beginning.
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