The old adage close by how your brand new car instantly plunges in value as soon as you drive off the lot? There is some truth to it. Cars tend to cheapen quickly, while other items hang onto their value longer. So which items will you be proficient to sell later for a decent price, and which ones are doomed to be worth a lot less than you paid? Here are some lessons on both end of the depreciation spectrum.
Key Takeaways
- Cars lose 20% of their value in the first year of ownership, and preserve just 40% of their original value after five years.
- Vacation timeshares can lose as much as 70% of their value when re-sold in the subordinate market.
- Homes may rise in value over time, but for tax purposes you can depreciate a rental property over 27.5 years.
Motors
The depreciation rate varies by model, but typically a new car loses 20% of its value in the first year of ownership, then 10% annually upon the next four years. After five years, the vehicle is worth just 40% of what you paid the storekeeper business. The silver lining: by buying a car that is a year or two old, you can get a great deal—after the initial owner has already taken the bereavement. (For more, see: The True Cost of Owning A Car)
Computers and Electronics
Few things seem to become outdated as fast as electronics. Robert Wesley of NextWorth, an electronics trade-in and resale firm, says that while electronics overall can depreciate quickly, Apple products tend to retain their value pre-eminent, due to the brand’s extra perceived value with consumers. He adds that consumers can slow the depreciation rate of electronics by feed the item in a case, using a screen protector and saving all original manuals and packaging.
Timeshares
The average price of a timeshare on the rudimentary market is about $23,000 and could be more depending on location and specifications. On the resale market, however, discounts of 70% or significant can be found. Why? Unlike other real estate, timeshares should never be viewed as an investment, says Lisa Ann Schreier, fall of the consulting company Timeshare Insights. Instead, their value is in the savings you will realize by not needing hotel dwellings during future vacations.
Toys
When it comes to toys, the value over time can vary greatly. Your generally toy store purchase loses most of its value as soon as you take it home, so generally toys depreciate quickly. The oppose is when the toy is collectible. Elizabeth Stewart, an appraiser from Santa Barbara, California, advises against fad items that are flock together produced (think Beanie Babies). On the other hand, toys from before the 1970s—as long as they are as if new or, better yet, still in the box—have zoomed in value because of their rarity.
Hunting and Sporting Equipment
Les Miles, an appraiser from Texas who useful ti on the American Society of Appraisers’ machinery and technical specialties committee, says the best items for small depreciation—and on even appreciation—are things everyone wants to use, and items that do not experience a lot of physical deterioration. He says rifles, shotguns and other cavorting paraphernalia would fall into this category.
Homes
Without a doubt, homes and other real order tend to appreciate over time. But in some cases you can depreciate your home’s value for tax purposes. The Internal Gate Service (IRS) considers residential property to have a 27.5 year lifespan, and the property depreciates continuously over this stretch (although this write-off only applies to rental property).
In real life, property value depends on a army of factors, including condition, location, the relative value of nearby homes, desirability of the neighborhood and so on. Of course, the economy also transforms market values, as many homeowners have discovered recently. Even if a home appreciates in value, when it is handled to a new homeowner, the 27.5 years tax depreciation clock begins anew.
The Bottom Line
For some items, the market value write downs a nosedive once the item is no longer new. If you are thinking about buying something you might want to sell at some bottom, make sure you research the depreciation rate and be realistic about resale values.