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Nashville Scene Winter Wear and Tear

How does winter driving affect the value of the vehicle?

By Marc Stengel

FEBRUARY 7, 2000:  Considering that the onset of winter is well upon us, it's worth taking a moment to consider the question posed by reader John Wilson, who manages to raise a number of issues in a single query:

"What difference does it make to a car's value whether it has been winter-driven or not?" Wilson writes. "I know all about salt and rust and ruined finishes, not to mention snow-induced slides, and front spoilers smashed on icy snow banks. I mean specifically, how much more should a car be worth that hasn't been winter-driven? A quick and dirty calculation that I often use to estimate the value of a used car is to assume that they depreciate about 20 percent per year, compounded like interest. That is to say, a one-year-old car is worth 80 percent of its brand-new selling price; a two-year-old car, 64 percent; a three-year-old car, about 51 percent, etc. This assumes normal use and mileage, no accidents, etc.

"All other things being equal," Wilson continues, "how do you figure the value of a car that has never been winter-driven? Would you use a depreciation factor of only 10 percent per year? Fifteen percent? Or is there some other way?"

This particular query is especially intriguing because of the variety of interrelated concerns it raises. First among them is Wilson's "quick and dirty" calculation of depreciation, which is actually fairly accurate and clean, according to various experts. Financial planning guru Dave Ramsey, host of the syndicated radio talk show The Money Game, equates automobile depreciation to an inevitable and immediate process of "value erosion." "The typical new car," Ramsey says, "will lose about 60 percent of its value in the first four years. Take a $20,000 sticker price--you've got an $8,000 asset at the end of four years. You're going to lose about 250 bucks a month."

Auto consumer advocate W. James Bragg tends to agree with these figures, but he presents them in substantially more dramatic terms in his bestseller, Car Buyer's and Leaser's Negotiating Bible. "New cars are terrible investments," he writes. "Knowledgeable people will tell you that, depending on the specific vehicle and timing of your purchase, most new cars or trucks depreciate from 15-20 percent to as much as 35-40 percent in the first few weeks you own them!"

As our letter-writer is so well aware, the point is that depreciation is to residual value what rust is to sheetmetal: It's a constant, corrosive, and ultimately unavoidable threat to your automotive asset. The only real difference, of course, is that you can't do too much about depreciation other than watch it munch away.

It bears pointing out, of course, that Ramsey's and Bragg's calculi of depreciation are general observations, but they don't much account for the effects of "regional" depreciation, which reflects the differing impacts of, say, a great Northern winter compared to a mild Southern one. There is a way to get a sense of regional variations in depreciation, however. The various price guides on the market--Kelley Blue Book and NADA, in particular--publish regional editions, allowing consumers to compare prices of vehicles from, say, the Sunbelt states to those of Rustbelt states. Better yet, log onto to the Internet and use the price evaluators at Kelley's site (www.kbb.com) or Edmund's (www.edmunds.com) to compare these regional differences more or less instantaneously. Another option is to call Chart Software toll-free at 1-800-418-8450 and purchase the most recent Residual Percentage Guide published by Automotive Lease Guide (or you may prefer surfing Chart's Web site).

Ultimately, however, there's minimal value in determining what effect climate has on depreciation. After all, in any given region, prices for used cars reflect what the market will bear. No matter how well owners baby their vehicles during the Season of Slush, when it comes time to sell, they have to keep their pricing competitive with the "going price" of similar cars in the area market.

This very circumstance, however, suggests two obvious tactics: First, a seller can try to market his car outside his own region--and into one where the weather effect is more severe. For a car that has little experience of salty streets, for example, a long-distance transaction might succeed in reducing the "geographical" component of the vehicle's overall depreciation.

A second course of action derives from the first: Wherever the sale ultimately takes place, it is vital to take routine measures for combating corrosion and maintaining paint and chrome finishes. Moreover, a logbook can work wonders at the time of closing a sale, especially if an owner has entered the date and mileage of every wash, polish, and thorough spray of the undercarriage. Each time a car is winterized--radiator flush and fill, suspension lube, oil and filter change, injector purge, and fuel system flush--a notation in the logbook will demonstrate to potential buyers how well the vehicle has endured winter's ravage. Indeed, so rare is detailed bookkeeping of this type in any region that a well-documented winter-wondercar should easily command better respect and, possibly, price than a comparable car without such documentation.

What our letter writer's opening query manages to emphasize most is the fact that depreciation, while heartbreaking in theory, is in practice an equal-opportunity disappointment. Yes, there are regional variations; but these tend to affect everyone in a given area in similar ways. Instead of attempting to outwit the depreciation tables, car owners everywhere can benefit more in the long run by performing needed maintenance--both mechanical and cosmetic--at regular intervals and by making detailed, written service records available for all to see and admire.

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