How Car Depreciation Works
Car depreciation is the silent cost that not too many consider when purchasing a car. While many associate fuel and service repairs as the biggest expense for a car, it’s often the depreciation that is going to hurt the most.
Research undertaken by CAP Automotive has found that the typical motorist will pay three times more in depreciation than fuel over the life of a car. Depreciation is unavoidable, and many variables determine how quickly it occurs. If you’re planning to trade-in or resell in the future, understanding vehicle depreciation and how it works can help you make the most of your new set of wheels.
What is Car Depreciation?
Car depreciation is the reduction of the value of your vehicle over time. Unless you own a particularly rare model that appreciates with age, the majority of cars on the road will experience rapid depreciation.
The rate and value vary between makes and models; however, most cars lose value (between 50 and 60 percent) in the first three years of ownership. You’ve probably heard the saying that a car depreciates the minute you drive it out of a dealership, and this couldn’t be truer. As a standard, as soon as your wheels hit the pavement outside the dealership your car has lost nearly a quarter of its value.
The depreciation averages out the longer you have your car. However, if you are only planning to keep it for a few short years (generally less than three), depreciation is something you need to be wary of when searching the market, as choosing the right car can help save you thousands.
How Car Depreciation is Calculated
Car depreciation consists of many different factors, and the truth is there is no exact science to calculate how much a car will decline in value over time. While the manufacturer and model of the vehicle are important indicators, below are several other factors that contribute significantly to depreciation over the lifetime of a car.
- Mileage- The average mileage per car in England is sitting just under 8,000. Cars that have done considerably more per year will be worth less.
- Reputation- Some brands are more sought after and have a much better reputation than others. As an example, a Range Rover will retain roughly 65% its value after three years, and fares much better than an MG, which only retains only 25% of its value over a similar timeframe.
- Number of Owners- A car in the UK will have four owners throughout its lifetime. A fewer number of owners indicates a higher resale value.
- The condition of the Car- Damage to a vehicle, either the interior or exterior, will reduce the value significantly. Try to look after your car and attend to any repairs that are required as soon as possible.
- Service History- An incomplete service history can also impact on depreciation. It can often raise questions among buyers surrounding if manufacturer recommendations were followed.
- Fuel Efficiency- The further you can get on a tank of petrol, the better. Cars that are more fuel efficient will fare slightly better than those that need filling up every second day.
Tips to Minimise Car Depreciation
- Keep your vehicle in excellent working condition and ensure any repairs/ faults have been rectified as soon as possible.
- Try and keep the mileage down. While it can be difficult, try to maintain the car under the yearly average.
- Service your car regularly and make sure to do this according to manufacturer specifications. Don’t forget to keep all documents and a full-service history.
- Stick with colours that are popular, and will stay popular. A lovely bright green may appeal to you; however, this can put off many buyers when it comes to selling your car.
- If you’re really looking to beat depreciation consider purchasing a ‘near new’ car to avoid the significant drop in value that cars experience in the first year. Buying a used car three years or older will also help you avoid the steepest depreciation in the car’s lifetime.
Do Your Homework
Car depreciation is as unavoidable as taxes. However, understanding how it works can help you get the best value for your money. Do your research before buying, and follow the above tips to minimise the depreciation rate on your vehicle.
For more top tips, motoring and consumer advice, please visit the We Buy Motors Blog again soon. For more information on how to sell your car or for an instant online car valuation online visit www.webuymotors.com.