How Quickly Do These Major Purchases Lose Value?

Many of the most expensive purchases you'll ever make--including new cars and some types of real estate--aren't good investments. In fact, these items start losing value as soon as you buy them.

While some purchases appreciate in value over time, such as stocks and real estate, others begin losing their value as soon as you sign on the dotted line. The resale prices of these items are only a fraction of the original costs, with some items seeing their value drop by up to 70%.

Does that mean you should never buy any of these things? Not necessarily. But you should at least be aware that these big-ticket items aren’t considered to be “good” investments.

Cars

New car
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Everyone knows that new cars lose a percentage of their value as soon as you drive them off the lot. But are you aware of exactly how much new cars depreciate after purchase? According to Ramsey Solutions, new cars lose a shocking 9-11% of their value after just one minute of ownership!

“A brand-new car loses somewhere between 9–11% of its value the moment you drive off the lot. So, with a $30,000 new vehicle, you’re basically throwing $3,000 out the car window as you drive the car home for the first time!”

Unfortunately, there’s nothing you can do about new car depreciation. After losing that initial 9-11%, the vehicle will continue to lose value during the first year you own it. Ultimately, the value will drop by approximately 20%. The silver lining is that the depreciation will level off after five years. Therefore, used cars that are at least five years old and in good condition will hold their value much better than new cars.

Rental Homes

While single-family homes and even apartment buildings and commercial real estate can all increase in value over time, rental properties are a different story. According to Investopedia, the IRS allows for a depreciation rate of about 3.6% every year over a span of 27.5 years while the property is offered as a rental.

While there are tax benefits to owning residential rental properties, be advised that you will not be building equity over time as you normally would with a home.

Phones

Happy male using smartphone at modern coffee shop
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If you’ve ever tried to resell or trade-in your old phone after buying a new one, then you know that smartphones don’t hold their value. In fact, they lose value even faster than new cars! Flipsy, a website that offers advice on pricing and reselling used items, states that “phones lose between 38% and 76% of their original values within one year, depending on the model.”

Of the smartphone models Flipsy compared, iPhones held their value the best (45% depreciation) while LG phones fared the worst (73% depreciation). Although selling your used phone might not net you a worthwhile amount of cash, don’t toss it in the trash! Phones need to be disposed of properly so that the rare materials in their circuit boards can be recycled.

Some Collectibles

Investing in collectibles rarely pays off. For every baseball card collection containing a rare Mickey Mantle card, there are hundreds that are worthless. Collecting fads kick off every few years, with enthusiasts becoming convinced that the things they are buying will only increase in value. In the 90s, it was Beanie Babies. Now, it’s NFTs.

That’s not to say some people aren’t able to hit the trend at exactly the right moment to make a profit. However, you’re much more likely to end up with boxes of so-called collectibles that are worth a small fraction of the original price. Insider has a fascinating rundown of items that were once red-hot and are now basically worthless.

Designer Clothing

Handbags and clothes in a fashion store
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Are designer handbags, shoes, and clothing items worth the price tag? Can you justify the cost by claiming that your Hermes bag or Chanel jacket is an investment?

This is a surprisingly complicated question. When compared to “fast fashion,” which is often poorly made and designed not to last longer than the latest trend, luxury clothing could have a lower cost per wear over time. Also, thanks to limited supply, many designer accessories do increase in value over time as they become desirable collectibles.

If you buy only high-quality pieces and take very good care of them, your wardrobe could increase in value over time. However, you’re more likely to find that the prices on secondhand fashion sites like Poshmark are anywhere from 10-40% lower than retail.

Computers, Tablets, and Game Consoles

Like cellphones, computers, tablets, and game consoles lose value as soon as you buy them. Factory refurbished electronics have the highest resale prices, but individuals will find it much harder to recoup even a fraction of the original purchase price.

The only possible exception to this rule is the current market for high-powered graphics cards. Due to supply chain issues and the demands of cryptocurrency mining operations, which use graphics cards at an alarming rate, it’s difficult for ordinary consumers to find new graphics cards. For example, late model game consoles are being resold for more than the retail price. However, this is an unusual situation and not the norm for electronics.

Wedding Dresses

Wedding dresses on hangers
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You might not consider the resale value of the dress when planning your wedding. Unfortunately, wedding dresses are another very expensive purchase that immediately loses value. The cost per wear of a new wedding dress is ridiculously high since (in theory) you’ll only need it for one day. Used wedding gowns are often stigmatized, with brides preferring a new dress that only they have ever worn.

Your best bet would be to buy a secondhand dress or rent your gown, which will cut the price down from thousands to $50-$600, according to Brides Magazine. Even if your heart is set on a high-end designer gown, you can still rent it for a fraction of the cost. Brides advise that rental companies may also bundle veils, footwear, and other accessories to save you even more money.

Motorhomes and Campers

Like cars, motorhomes, campers, and other recreational vehicles lose a percentage of their value the moment you get the keys in your hand. RVs have a high cost-to-use ratio when you divide the cost of the vehicle by the number of vacations you take in it.

RVs do not increase in value over time. That’s why many veteran travelers recommend purchasing a used rig–or to try renting a motorhome before you commit to buying one. In addition to the depreciation, RVs rack up maintenance costs and storage fees when not in use, as well as the cost of fuel and campgrounds while traveling.

Books, DVDs, and CDs

Stacks of used books
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Unless you’ve been lucky enough to score a signed first edition of a popular title, most used books hold onto only a fraction of their original value. The same goes for DVDs, CDs, and even video games. Resellers will offer you pennies on the dollar or, more often, store credit to bring home used books and other media to replace what you just sold.

Even vinyl records, which have made a comeback in collector circles over the past ten years, might not be worth as much as you think. The vast majority of records are worth less than a dollar or two. If you hope to recoup the cost of your media by reselling it, prepare to be disappointed and frustrated.

Fine Jewelry and Watches

Is a watch a good investment? That’s a tricky question. According to The Loupe, a fine jewelry and watch guide, some luxury watches can appreciate 10-30%. Rare watches, limited editions, and brands such as Rolex, Cartier, and Patek Phillippe typically increase in value. Less exclusive brands don’t hold value in the same way. Condition is also an important factor.

What about diamond jewelry? Unfortunately, the price of diamonds relies more on the artificial control of the world’s supply rather than their actual rarity. Colored gemstones such as emeralds are actually much rarer, yet diamonds cost more per carat. A diamond engagement ring will lose value as soon as it leaves the jewelers, in part because the markup is anywhere from 100-200%, according to Smart Asset.

Timeshares

Timeshare
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Perhaps the worst big-ticket purchase you can make is a timeshare, according to many financial experts. A timeshare can be partial ownership in a specific vacation property or a membership in a club that allows you to redeem points to stay at different properties that are part of the timeshare group.

Why are timeshares generally such a bad idea? First, they’re often confusing. Second, they are notoriously difficult to resell. Even when they can be resold, the owners can expect to take a loss. In addition, timeshare ownership often requires you to pay HOA fees even if you’re not able to use the vacation property that year.

With vacation rental sites like Airbnb offering cheaper per-night accommodations all around the world, buying a timeshare simply doesn’t make financial sense. Especially not when you consider that these pricey “investments” can lose over 70% of their value on the resale market.

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