What does depreciation refer to in auto appraisals?

In the context of auto appraisals, depreciation refers specifically to the reduction in value of a vehicle over time due to factors such as age, wear, and tear. As a vehicle ages, its market value typically decreases, influenced by its condition, mileage, and the general demand for that model. This concept is crucial for appraisers when determining the current worth of a vehicle, especially after an accident or when evaluating the vehicle for resale.

Understanding depreciation helps appraisers provide accurate evaluations that reflect not only the initial purchase price but also the current market dynamics and physical state of the vehicle. This means that while a vehicle may have been purchased at a certain price, its current appraisal value will account for any declines brought on by its age and usage.