Depreciation american vs foreign

Depreciation: American vs. Foreign

There is no secret that when you purchase a vehicle, it is one of the worst investments a consumer can make. Within five years of ownership, a brand new vehicle can depreciate to 65% less than the original selling price. Despite these numbers, it is nearly inevitable for people to actually acknowledge these statistics by making change, because transportation has become almost a means of a necessity.

Some people prefer to buy American made vehicles and others prefer a foreign alternative. Regardless of which line of cars they choose, the vehicle is going to lose its value as it ages, but which line of cars will depreciate less? There are many reasons is to why a vehicle can depreciate, however, if adequate research is done it may be clear that the purchase of different vehicles may be a better investment than others.

Traditionally, foreign imports, particularly Japanese, hold their value better than American or domestically manufactured vehicles. There are many reasons that influence this trend, and it depends on the state of the economy at the time of your purchase. An important impacting factor on this is the current exchange rate. When the exchange rate lowers, it can result in more expensive foreign cars. This also forces the US to decrease the price on imports. However, if the rate stays low, the demand for domestic exports will increase, and therefore the US recovers some of the loss in volume. Either way, this development affects our prices for both American and foreign imports in America. Another factor is the price of fuel at the time of the purchase. If gas prices are high than fuel efficient vehicles will typically hold value better than those that are not. Many Japanese imports tend to have better fuel efficiency than most American vehicles. However, American manufacturers have definitely produced more competitive vehicle line ups within the past 5 years. Another dynamic, continues to be the predicted reliability of a vehicle. Although American vehicles have made great strides in this area, the Japanese still hold this title over us.

Regardless, what we need not forget, is that whether the vehicle is American or foreign, it is going to depreciate. This being the case, the best buy is a used vehicle. Why suffer a loss in value in something you bought, when you can buy something that somebody else has already suffered for? That being said, the key point is to evaluate the needs of the buyer. How long are they planning to keep the vehicle? How much can they afford and how much are they going to have to finance? Clearly, foreign vehicles are still depreciating at a slower rate than the American vehicles, but they are also usually more expensive. One more thing to consider is that American manufacturers have made great advances to overcome their image and to illustrate their confidence by offering a lot of great incentives. Therefore, a consumer should look at all of the variables to make the best decision, and to not just base it on whether it is a foreign or domestic vehicle.

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