Car depreciation explained

Car depreciation explained

When it’s time to buy a new car, you need to consider depreciation. But, what is it and how does depreciation affect you?

Depreciation

In the motoring world, depreciation is basically the difference between the value of your vehicle when you pay for it, and how much the same car’s worth when you eventually re-sell it. This can differ between brands and models, but the rule of thumb is that a vehicle loses 15-33% of its value in its first year and around 50% over three years.

There are some factors that affect cars depreciating. These include:

Reliability

The more unreliable a vehicle is, the more it’s going to drop its value.

Mileage

Most people do around 10,000 miles a year, so if you drive more than that, your ride will depreciate more quickly.

Warranty

A three-year warranty is standard for a new car, but some brands, like Kia and Hyundai offer longer – seven years with Kia and five years with Hyundai. This helps greatly when you re-sell, as the warranty will transfer to the car’s next owner.

Condition

Keeping your vehicle in tip top condition helps it hold its value; if there’s damage inside or out then this will harm the value.

Efficiency

Cars that are economical, and do lots of miles to the gallon are more enticing, and therefore keep their value better than cars that guzzle fuel. Therefore, cars with diesel engines are more likely to hold their value. That said, petrol cars are getting more and more efficient these days.

Owners

If a car has had lots of owners, it won’t hold its value as well.

Popularity

Manufacturers tend to update their models every few years, so the more up-to-date your vehicle is, the more valuable it will be.

Service History

Ensuring your car is serviced on a regular basis will make sure that it holds as much of its value as possible.

Colour

You may really love that brand-new lime coloured car, but a lot of other people won’t when it comes to selling it on. Buy a motor in a shade that isn’t too outlandish – and it’ll be easier to sell without dropping the price.

Conclusion

So, depreciation is fundamentally how much value your car loses from when you buy it, to the point of selling on again. Some vehicles depreciate more rapidly than others, and you can do things to slow down the deprecation, but it happens to all cars. If you don’t do anything else, just make sure you keep your car in good condition and get it serviced regularly – these two things will ensure your car holds its value as much as possible.