Which depreciation concept is used to justify choosing a higher-mileage car?

Which depreciation concept is used to justify choosing a higher-mileage car?

• A. They have fewer maintenance costs.
• B. The depreciation portion has already been accounted for.
• C. They come with a longer warranty.
• D. They offer higher mileage allowances from banks.

Answer: (B)

Depreciation is the loss of value an asset experiences over time. A higher-mileage car has already taken a big hit in value from wear and use, so its price today reflects that past depreciation. In other words, the depreciation portion has already been accounted for in what you pay. Because most of the depreciation has already occurred, the remaining depreciation you’d face in the future is smaller, which can justify opting for a higher-mileage vehicle. The other factors—maintenance costs, warranties, or lender mileage allowances—don’t tie directly to how depreciation has affected the car’s price.

Depreciation is the loss of value an asset experiences over time. A higher-mileage car has already taken a big hit in value from wear and use, so its price today reflects that past depreciation. In other words, the depreciation portion has already been accounted for in what you pay. Because most of the depreciation has already occurred, the remaining depreciation you’d face in the future is smaller, which can justify opting for a higher-mileage vehicle. The other factors—maintenance costs, warranties, or lender mileage allowances—don’t tie directly to how depreciation has affected the car’s price.