Glossary

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Depreciation

When making a major purchase such as a house or car, depreciation is one of the most important things to consider.  One of the smartest real estate moves you can make is purchasing a house in a neighborhood in which homes are appreciating in value.  Buying a house in a neighborhood that has undergone changes from better to worse, however, can indicate that within some years, the amount you paid is greater than the amount for which you would be able to sell.  A good indicator of depreciation of a home is high crime in the area, deteriorating or condemned houses in the neighborhood and poorly maintained yards.  Also consider your own control over depreciation.  Failure to clean and maintain your home and yard can negatively impact its value, causing it to depreciate.  Instead, keep your home up-to-date and tidy so you don’t lose out on your investment.

One of the most notorious cases of depreciation is with cars.  This is a major factor when deciding whether to buy new or used.  It is estimated that within the first year of owning a new car, it depreciates by 20 to 30 percent.  Buying a used car, on the other hand, usually means that you pay a considerable amount less because the majority of the depreciation of value has already taken place.  Regardless of your decision to buy new or used, you should know what you can do to control the depreciation in value of your car.  Be sure to schedule oil changes and maintenance appointments, as well as keep keeping the exterior of the car in good condition.  You can also research special maintenance procedures that are specific to your climate zone and driving habits.  Keep tabs on your warranty so you can avoid wasting money on the procedures that can keep your car from dramatically depreciating.
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