A lot of our most expensive purchases lose value as soon as the deal is signed. Cars, electronics, and timeshares are notorious for depreciating immediately. Consider the following reasons why they are worth so much less after the purchase and what you can do to combat the losses.
Photo via Flickr by Tax Credits
We’ve all heard the arguments about the advantages and disadvantages of purchasing a new car, but the facts don’t lie. On average a new car loses 11% of its value the second you drive off the lot, according to Edmunds.com. After only five years, your car is worth only 37% of the price you paid for it at the dealer. It’s no wonder so many have little interest in driving a brand new convertible.
On the flip side, if you buy a one- or two-year-old car, you can get a great deal! The original owner has already taken that 11%+ loss. You get a quality car with a few miles and a little wear and tear while you avoid having to pay for all the marketing and distribution fees associated with a new car purchase.
Computers and Electronics
Nothing is as frustrating as when you finally make that big electronic purchase only to see a commercial for the same device only better, with more features and just a month from release. Cell phones, HDTVs, computers, tablets, and gaming consoles all face significant depreciation.
“While you can’t put a price on fun, consumers may not realize just how much they’re spending on their gaming activities,” said Penelope Graham, editor at RateSupermarket.ca. You might be surprised, but, according to a RateSupermaket infographic, some of the most popular video gaming consoles have depreciated nearly $300 since launching. Other devices, such as cell phones, see even worse levels of depreciation with new models coming out in what seems like every few months. It is essential that you shop around to find the best possible deal when purchasing your electronics. Maybe just wait a couple months until the price drops.
The sales pitch for timeshares do a great job of selling the dream of owning property in an awesome destination that you will want to visit long into the future. The reality sets in for many timeshare owners when they suffer a financial setback or perhaps realize preplanned vacations don’t work for them. Whatever the change in circumstances, they want out. The bad news: the average price of a timeshare on the resale market is about 20% lower than those same timeshare on the primary market. Potential buyers should really consider the investment they are poised to make. They are investing in a discounted vacation plan for life.
Once timeshare purchasers understand that their purchases should not be viewed as a way to acquire wealth, they will make better decisions. Timeshares definitely have benefits for people that want to travel in a more controlled environment in a structured, budgeted manner. Just evaluate your options carefully, and you can find the real value of a timeshare purchase.
The Long and Short of It
Consumers must recognize that, though big purchases can be life-changing, they quickly lose their value. There’s no way to avoid the depreciation, but smart consumers minimize their losses. How do you avoid losing your shirt with your next big purchase?