The Stormy Skies of Depreciation

Depreciation is the dark cloud hanging over new car purchases, steering many buyers toward used vehicles. How can credit unions capitalize on used car financing opportunities?


Checking out a snazzy, new 2005 vehicle? Beware. According to the experts at Kelley Blue Book, in three years that new car could lose up to 73 percent of its value. At best it will retain a mere 62 percent of its value after three years.

Depreciation is the dark cloud hanging over new car purchases. While most vehicles lose 15 to 20 percent of their value each year, the first year tends to hurt the most. In fact, the two-minute drive off the lot can cost some owners up to 15 percent of their new vehicle’s value. This instant loss reflects the difference between the wholesale price – what the dealer pays – and the retail price – what you pay.

For credit union members unwilling to throw away money on depreciation for that new-car smell, a high quality, late-model used vehicle is the answer. Used automobiles have cost-saving benefits above and beyond the depreciation. Some of the benefits of buying a used car include:

  • Lower purchase price.
  • Lower financing costs: used cars have fewer fees and the lower costs result in less interest.
  • Lower registration and license fees: these fees are usually tied directly to the value of the car, so a less expensive car means less money at the local DMV.
  • Lower insurance premiums.
  • Lower depreciation: when you buy a late-model used car, the previous owner has absorbed the steepest portion of the depreciation cycle.

In 2003, more than 40 million used vehicles were sold in the United States. Credit unions are financing many of these vehicles and offering members good deals. In fact, credit unions are making headlines for their superior used-car financing options. This past summer, Newsday encouraged readers looking for a bargain to check out their local credit union, citing that credit unions, “beat banks by an even larger margin for used-car loans, averaging 5.5 percent, compared with 8.62 percent at banks.”

Despite this competitive advantage, credit unions must still compete with dealer financing. Research shows that credit unions are losing potential car loans to dealership-brokered deals – 70 percent of credit union members who buy a vehicle from an independent or franchised dealer also finance the vehicle through the dealer. One way of avoiding this competition is to work with car sales companies that steer buyers back to the credit union.

For instance, thousands of credit unions have partnered with Enterprise Car Sales, due in large part to Enterprise’s guarantee that credit unions receive 100 percent of members’ used-car loans 100 percent of the time. Enterprise offers consumers more than 120 makes and models of high-quality, late-model ASE-certified used vehicles that are priced below NADA or Kelley Blue Book values, and include a 12-month/12,000-mile limited power train warranty. Best of all, members have no fear of depreciation or even buyer’s remorse from driving off the lot. Every Enterprise vehicle comes with a seven day/1,000 mile repurchase policy.

Don’t let the dark cloud of depreciation rain on members’ car buying experience. Remind them of the value of used vehicles and send them to a company that will guarantee you get the loan.



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Feb. 14, 2005


  • Our credit union just bought into the Enterprise Car Sales idea. It's great that the credit union gets to Finance the used vehicles 100 percent of the time, but credit unions should be careful when it come to GAP & MRC insurance coverage because Enterprise can easily take these $ right out of the credit unions pocket.
  • This would be great if you could sell them for what they are worth. I have to many horror stories with buying rental cars.