Why Do Automobiles Depreciate?

You might have heard of "depreciation" in reference to taxes. You know that corporations will receive tax deductions on depreciated equipment, vehicles and property. Why do automobiles depreciate and why is this important for calculating leases?

Everything deteriorates. If you leave a loaf of bread outside, eventually it will mold. Your body might ache a little more as you age. The same is true for your automobile. Each year, your car's value is calculated. The lower value is called "depreciation."

When you calculate the car lease, you must include the "depreciation" value. The goal of some banks is to charge you a monthly fee based closely on the depreciated value of your car. Thus, the ideal car lease should always match the value of the vehicle. This can be a challenge, but that is all back office financial stuff. Start with a test drive - just visit our dealership today.
Categories: Finance

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