General

The Value of an Automobile

It is said that an automobile loses half of its value when it drives off the dealer’s lot. That is, the price that is willing to be paid for it, now that you drove it, is half of what you just paid. For some reason this does not apply to the cars on the dealer’s lot but which the dealer allows to be driven around town, so it has no relation to the mileage on the car, only to the demands of potential purchasers. Such purchasers might be individual buyers who intend to use the vehicle, or someone who intends to resell the vehicle, or even the dealer from whom the vehicle was originally bought. Why is this?

This is not just a hypothetical question as the lease on our 2006 Honda Odyssey ends in February, and we have the opportunity to shop for a replacement in what should be a buyer’s market.

If the immediate resale price of the vehicle, when the only difference in state is a change of ownership, is 50% of the initial sale price of the vehicle, then the initial sale price is inflated.

Is there data on this truism?

Standard