They say that driving a new car off the forecourt for the first time will slash its value. Unfortunately, this is true, and it’s known as car depreciation.
Depreciation affects all cars, but in this article, we will explain how best to avoid it.
What Is Car Depreciation?
Owners of new cars are often alarmed at the rate their brand new vehicle’s value can plummet. Depreciation is the difference between what you pay for the car and what it’s worth when it’s time to sell it.
Knowing how to avoid the pitfalls of car depreciation can save you a ton of money. Additionally, some argue it is more valuable than finding a car with good fuel efficiency.
The savings you can make with a vehicle that depreciates slower can outweigh the extra running costs. Which is something many people overlook when buying vehicles.
How Much Does A Car Depreciate Per Year?
The rates between models vary, but it’s not uncommon for cars to lose as much as 30% of their value in the first year.
After losing around half their value by the third year, this slide begins to slow, but the first three years can be brutal.
The used car depreciation rate can be much slower than that initial steep slope for new cars.
How To Avoid Car Depreciation
There are a few things that can cause your car to depreciate faster than others.
The things to look out for are:
- Mileage
- General condition
- Desirability
- Reliability
- Service history
- Number of owners
- Warranty length
- Fuel Efficiency
Below is some more information on each.
Mileage
The average mileage is around 10,000 miles per year. So, if you are doing more than that, then your vehicle is going to depreciate faster.
Let’s face it, a three-year-old car that has done over 50,000 miles is going to be less desirable than one the same age and model with just 25,000 on the clock.
Cars that are driven fewer miles than the average may retain more of their original value than those that are doing a lot of hard miles.
General Condition & Desirability
The general condition of a vehicle greatly affects how much it is worth. Any visible damage to the bodywork or interior will make it less desirable and therefore worth less.
A car’s desirability also impacts how quickly its value will depreciate.
Some manufacturers like to give their models a facelift every so often which means having an older model reduces the desirability. The more recent the model, the more people will pay for it, while older models start to become harder to sell.
By staying on top of your car’s general upkeep you can help preserve its value. Removing scratches and dents when they occur will keep the price high and maintaining a level of tidiness and cleanliness will save you in the long run.
Reliability
If you own a car that has a bad reputation for its reliability, even if yours is fine, you may find its value drops rapidly.
Once people get a sense that a particular model isn’t great, they will be much less willing to part with their hard-earned cash for it.
Avoid cars with reliability issues for two reasons.
Firstly, you don’t want the hassle of being stranded if it breaks down, but secondly, people don’t want to spend big money on unreliable cars.
Service History
Cars with incomplete service histories can feel the full force of depreciation.
Having an unstamped book may just be a failure by the garage to stamp it, but if it’s left blank, it looks like the work wasn’t done.
Having a complete service history, including stamps in the logbook and receipts, goes a long way to increasing customer confidence.
By ensuring your car has had all of its regular checks you are investing in a higher resale value.
Number Of Owners
Just like the service history, the number of owners can affect a car’s depreciation.
Cars that have had lots of owners in the past will be worth less because it may seem like people would rather sell it than put up with it.
Perhaps it has running problems or it’s just not very practical, whatever the reason, cars with many previous owners are not typically worth much.
Warranty Length
Many manufacturers are backing themselves by offering long warranties, some as long as seven years.
If a car only has a three-year warranty and you are selling it after 18 months, that doesn’t give the new owner much time under the manufacturer’s guarantee.
However, with some manufacturers now offering 7 years of cover, this can help maintain a higher resale value.
Fuel Efficiency
Fuel efficiency is important, even if it’s not always the rule that they depreciate slower.
For instance, a large saloon car that runs on petrol is going to depreciate faster, especially given the fluctuations in oil prices over the years.
This is why small cars are so popular in the United Kingdom – their running costs are much lower than large ones.
Depreciation Value Of A Car After An Accident
It may be obvious, but your car may be worth significantly less following an accident.
Minor scrapes and bumps aren’t necessarily going to devalue your car much, but any major works that need doing will have to be recorded in the logbook.
That means when it’s time to sell, the potential buyer may see the car’s history and decide it’s not worth the asking price. They will feel they are taking more of a risk in purchasing it, and so a lower price may be offered to compensate them.
If you are not at fault for the accident, the compensation you may receive could offset any depreciation to your car’s value.
Car Depreciation Calculator
There are many car depreciation charts and calculators available on the internet which you can use as research before buying a new car. This can be a useful tool to figure out how much you are likely to be losing.
The calculator will ask you how much the car was worth when new, how much you paid for it, and how old it is. Some online calculators will ask you for the make and model of your vehicle to give you a more specific guide to its depreciation.
Others use a percentage as a guide and only give you a rough estimate of how quickly your car’s value will depreciate.
Knowing how to calculate car depreciation means you won’t be left with a nasty surprise when it’s time to trade in your old car for something newer.
What Cars Depreciate The Least?
According to What Car? the cars that depreciated the slowest in 2020 were all high-value and high-quality.
The likes of the Lamborghini Urus, Tesla Model 3, and Land Rover Defender all ranked among the top 10 slowest-depreciating cars last year.
The car that came out on top was the Porsche Macan Turbo PDK, which retained 59.9% of its original price after three years. Sure, it saw a drop in price of over £28,000 for that period, but because of its high quality, it retains a large chunk of its original value.
The Cars That Depreciate The Most
Given that the least depreciating cars are high-end, it’s not a huge surprise to see some everyday cars depreciate the fastest. Cars like the Peugeot 308, Fiat 500C, Vauxhall Astra and Citroën C1 lost their value quickly.
However, What Car? discovered that the fastest-depreciating car of 2020 was the Maserati Quattroporte, which retained just 20.8% of its original value after three years. That means this sports saloon dropped from £75,735 to £15,775 in such a short time.
By comparison, the Vauxhall Astra 1.5 Turbo D Ultimate Nav retained 26.6% of its original value after three years, dropping from £27,855 to £7,400.
You may have noticed there are a lot of silver, white and black cars on the road and it’s not just because people don’t like colour. These are the most common types because their values depreciate much slower than bolder colours.
Sure, that bright green car might have your name all over it, but when it comes to selling it, don’t be surprised if not many people feel the same. Avoiding flashy colours and custom decorations like spoilers or wheel arches can save you a lot of money in the long run.
Our Final Thoughts
To help sum this up, the main things you need to consider when avoiding car depreciation are:
- Mileage
- General condition
- Desirability
- Reliability
- Service history
- Number of owners
- Warranty length
- Fuel Efficiency
It’s impossible to stop a car from losing its value over time, but by following these tips, you can help slow down the process.
The steepest depreciation occurs when you buy a new car and take it home. By buying a nearly-new or used car, you can avoid that initial hit to your car’s value.
At FairSquare, we offer new and used cars which can be financed using hire purchase (HP) or personal contract purchase (PCP). You can choose from thousands of cars and have them delivered to your door without the need to visit a showroom.
All of our cars have been quality checked and come with a good service history, so you can rest assured that FairSquare has got your back.
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