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Car Depreciation

There are numerous factors to consider when buying a car, number of seats, fuel and economy type, mileage, colour and the cost of an insurance policy… the list is never ending. One thing you might be forgetting about as you hand over that hard-earnt money is, it might not be your ‘forever car’, and the chances are, you’re going to want to upgrade in a few years. If the value of your car has dropped substantially in the time you own it (known as depreciation) then you might kick yourself, so next time you shop around the motor trade forecourts consider how well the vehicle will hold its value.

Car Value DepreciationThere’s no blanket rule, but new cars can generally lose anywhere between 15% and 35% of their value in the first year alone, which can be a painful prospect for any owner. When you look at the first three years, a vehicle can lose half its value, and that is a big hit!

Of course, when it comes to new and used cars there are some fantastic benefits to buying factory fresh so to speak. A new car test driven on trade plates off a forecourt will be pristine looking, have the most up-to-date technology, be in top-notch condition and have a warranty to help you maintain it in those first few years. So, buying new isn’t a no-no, but it’s wise to think about the longevity of your car’s value. Especially, if you adore that banana yellow SUV, because when it comes to reselling the car, you will have limited the number of potential buyers by your choice of colour.

Buying a used car greatly reduces the depreciation rate as the price premium is generally down to the condition of the car, but if you do plan to buy from new, there are steps you can take to reduce that problem of depreciation.

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Start by choosing a popular model of car; Minis and Range Rovers for example are always in demand. They are attractive practical vehicles with good reputations, so they can command a higher resale price, more niche vehicles will not be so appealing. Unfortunately, this also works in the other direction, much-loved stalwarts like Ford Fiestas are so over-represented in the second-hand market that they need to be priced competitively to sell. In a similar vein, choose a colour that isn’t going to turn off buyers, black and silver are always safe bets. Also, choose accessories and trim that will appeal to most drivers.

How fuel-efficient is the car? Gas guzzlers lose value more quickly so there’s an extra reason to avoid them – in addition to protecting the environment. Cars like this can also cost a fortune to run, so second-hand buyers tend to give them a wider berth. This principle also goes for the cheapness and availability of parts, and the cost of car tax.

One of the main reasons that new cars attract such a premium is that they are in superb condition. If you can keep your vehicle as close to new as possible – clean, unblemished, well-maintained with a low mileage – then it’s going to hold its value better and appeal to more buyers when it’s time to say goodbye.