If you buy a brand-new car you probably do so in the knowledge that it is going to lose its value over time. Depreciation is a fact of life with some products. However, what you are often unprepared for is how quickly certain things plummet in value.
Timeshare is a classic example. You buy a timeshare in the hope and expectation that it will give you years of enjoyment and even hold its value so that you can sell it at some point. The reality of timeshare investments is often different from that expectation.
Removing yourself from that scenario is not always easy. With the help of timeshare cancellation information, you might be able to come out of your investment with the minimal amount of financial damage as possible.
Timeshare is a prime candidate if you are looking for a product that depreciates faster than anticipated. Here is a look at this and some other products that also lose their value quickly.
Don’t expect to make money from a timeshare investment
The average timeshare investment is in the region of $23K, but some come with a higher price tag. If you then look at timeshare resale offers and prices you can often see heavily discounted prices that can knock as much as 70% off the original value.
The bottom line is that a timeshare should not be viewed as an investment. It might suit your holiday plans to buy a timeshare but don’t expect to make money from one.
Technology changes rapidly and that means prices fall quickly
As soon as you buy the latest smartphone or laptop model the value will start to fall.
Electronics get quickly outdated and new models come along regularly. Although some brands, such as Apple, for instance, do retain their value better than some of its rivals, electronic items shrink in value quickly.
Your new car will lose about 20% as soon as it leaves the showroom
The average depreciation of a new car is about 20% over the first twelve months. In general, your car will be worth about 40% of the price you paid for it in five years.
You can reduce the impact of depreciation by buying a car that is about 2 years old so that someone else has taken the initial depreciation hit.
Choose toys wisely if you want to collect them
The value of toys can vary greatly. Some items become collector’s items and some just drop in value at a rapid rate.
It pays to investigate collector trends to see what toys might hold their value compared to the majority of items that don’t hold their worth.
Hunting and sports equipment can quickly fall in value when they are used
If you are buying a hunting gun, for instance, you are probably going to use it regularly. That wear and tear will result in rapid deterioration.
On the other hand, if you are savvy enough to buy a good sports item and put it away in great condition, you increase your chances of dodging average depreciation.
When depreciation can work in your favor
Most people think that investing in real estate is a one-way ticket to capital growth. The average property does tend to rise in value over time. However, IRS rules consider rental properties to have a typical 27-year lifespan. That means you might be able to use depreciation rules to reduce your tax burden.
Whatever big ticket item you are thinking of buying, always think about depreciation, and don’t be surprised when the value of something like a timeshare investment falls like a stone once you sign on the dotted line.