It’s often said that the value of a car begins to decrease once it’s driven off the lot. The reason comes down to some Nobel Prize-winning insights about human behavior and some quirks of the automotive industry.
Everyone in the auto industry pays close attention to depreciation: car owners and buyers care about resale value, automakers calculate lease payments, and, of course, dealers.
For much of the auto industry’s century-long history, the principles behind it have remained fairly stable.
But the Covid-19 pandemic has turned the used car market upside down. Auto production is restricted, supply chains are severely short-circuited, and the number of new cars is reduced.
“Used car prices have actually been rising for about two years,” said Alex Yurchenko, chief data science officer at Black Book and Motor. “We’ve never seen anything like this in the market.”
The result is: the car’s value retention rate after three years is about 10% higher than during the epidemic. Industry analysts say this is likely to continue.
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