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Depreciation can be your friend

February 16th, 2009 at 11:30 am

I had some free time today so I went to Kelley Blue Book (/http://www.kbb.com) and updated the values of our 2 vehicles. I track these values in Quicken because it gives me a sense for how fast vehicles depreciate (hint: very).

Our 2003 Subaru is worth about $10 grand. The original MSRP was $25.5K. So in 5.5 years it has lost just over 50% of its value. A good chunk of that (about $3000) occurred in the last year. New car sales have been so pitiful that it is pushing down the used car market as well.

Our 2nd car is a 98 Subaru station wagon. It's pretty utilitarian but it gets us around when we need it (I work from home so I don't need a daily vehicle). It has around 90K miles on it and its value has dropped to $5100. We paid $6700 for it 2 years ago so that's not too bad. Depreciation slows a lot after the first 5 years, in general.

The good news is that we are getting close to the point where we could just go to liability coverage on the 98 Subaru. Our insurance is really cheap so we are keeping full coverage for now, but another couple of years of depreciation and we might drop it! If we dropped collision and comprehensive on the 98 Subaru, we would save $220 a year on our insurance. If the car was ever stolen or totaled and we were going to file a claim, we would get back the blue book value minus our $1K deductible. Right now, that would be $4100. That works out to an 18-year breakeven period. When it gets down to about 12-15 years we will drop the comprehensive/collision, but for now it makes sense to keep it.

1 Responses to “Depreciation can be your friend”

  1. Ralph Says:

    I couldn't agree more, depreciation can be your friend if you own an older car. Losing only hundreds per year instead of thousands is quite nice.

    On the collision insurance, I've never been able to bring myself to drop it. But since our rates just got bumped up AGAIN since my daughter took a car to college, I guess I should revisit it.

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