Functional obsolescence refers to a reduction in the usefulness or value of an asset due to changes in technology, design, or consumer preferences. For example, a home with outdated appliances may be less appealing to buyers, even if the structure is in good condition. This concept can also apply to vehicles that lack modern features like advanced safety systems or fuel efficiency. As newer models are introduced, older designs may no longer meet the needs or expectations of consumers, leading to a decline in their market value.