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How to Protect Your Vehicle Investment

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More than a tool to get you from point A to point B, your car is one of the most valuable financial assets you have. However, most people fail to treat their vehicle like the investment it is, with long-term financial interests in mind. By taking a few simple steps now, you can protect your car’s resale value and receive a better deal down the road. You’ll also ensure that your car is running efficiently and delivering peak performance today.

Value your vehicle

The COVID-19 pandemic has shifted so much of everyday life, and our driving preferences are no different. Pre-pandemic, our society certainly depended on cars, but we value the functionality and freedom of owning a vehicle even more today. In fact, the data supports this: today, 73 percent of people say they enjoy owning a vehicle, compared to 67 percent three years ago. More Americans plan to increase the number of vehicles in their garage within the next five years. The bottom line is, Americans prefer to drive their own vehicles more than any other transportation option.

When you're looking at your car as a true financial asset, you need to keep the car's resale value in mind. That includes the rate of depreciation, or how a car's value decreases over time. Wear and tear, mileage on the odometer, and structural damage will speed up the car’s depreciation rate, while good maintenance habits will pump the brakes on that decline. If you’re thinking long-term about your car as a financial asset, keep in mind that some vehicles depreciate faster than others, depending on the make, model, year, and market demand. Also, used vehicles typically depreciate more slowly than new vehicles.

Protect your car's resale value

While some depreciation is unavoidable, there are steps that will keep you in the driver’s seat. First, safe driving will really pay off. If you can avoid dents and fender-benders, you’ll help keep your car’s resale value high and the depreciation rate low. If an accident does happen, make sure to have it repaired immediately, and keep good records. Regular maintenance will help keep your car cruising, and slow down depreciation. Watch out for rust, especially if you’re driving in areas with salt, sand, or dirt. Oil changes and car washes will help keep your vehicle in tip-top condition.

Don’t forget about the interior of the vehicle, either. Avoid eating food in the car and clean up any spills as quickly as you can. It’s also best to avoid smoking in the car. A regular cleaning and detailing routine will make driving more enjoyable and prevent depreciation-causing damage. In many ways, your car's resale value is in your hands.

Mind the gap

Even the most cautious drivers know that car insurance is a necessity in the event of an accident or theft. When life happens, insurance will help protect your finances. However, sometimes your car insurance company will offer you less money than what remains on your loan. This is where Guaranteed Asset Protection (or GAP) insurance can, well, fill the gap! This type of supplemental insurance will help pay off your auto loan when you make a claim but still owe more than the depreciated value.

Here’s a real-world example of how GAP insurance is useful. Let’s say you purchase a vehicle for $30,000, and you still owe $25,000 when you get into an accident. Your car insurance will pay the lender up to your car’s current or depreciated value. Let’s say it’s now worth $23,000: in this case, you still owe the lender $2,000. GAP insurance helps cover that remaining $2,000.

This type of insurance offers the best protection for those with a low down payment or a long financing contract, because they’ll likely owe more than the car is worth at first. It also makes sense for those leasing a vehicle. If you’re buying a vehicle at a dealership, they’ll probably offer you GAP insurance, but beware. It's best to avoid signing on for this coverage at the dealership; generally, you’ll pay more through them than you would at a trusted credit union. A financial institution with your best interests in mind will work with you and offer more affordable rates.

The key to your car investment

The best way to treat your vehicle like a financial investment is to seek out financing options from those who understand your strategy. As a member-owned credit union, Power Financial Credit Union understands you want to protect your car’s resale value. Call us today to learn about flexible options for quality auto loans and discounted insurance products for your dream vehicle.