Car depreciation is the difference between the car’s value at the time of purchase and when it is sold. Typically, car depreciation value varies between models and makes, and it is between 10%-40% in the first year and up to 60% over three years. So, make sure you know all the facts about car depreciation before you make your purchase. There are several online calculators that can help you find out how well your car will hold its value. A motoring costs expert will tell you that choosing a car with a higher car holding value delivers more savings over time than concentrating on fuel efficiency. For example, a medium-sized family car purchased four years ago will have lost around $18,000 in value by now. But the cost of fuel of the same car over the same period will only have been around $7,500, based on 12,000 miles a year.
Factors that affects a car’s depreciation rate
Following are some of the factors that affect the rate of a car’s depreciation.
- Mileage: The average mileage of a typical car is roughly 10,000 miles per year. So the more miles your car runs, the less it is worth.
- Reliability: According to various customer satisfaction surveys, some cars are less reliable than others. So if your car is considered unreliable, its price at the time of sale may be less than what you paid during the time of purchase.
- Number of owners: A car that has exchanged hands between more than one owner is more likely to fetch less value at the time of sale or purchase. You will need to check the numbers of previous owners on the V5C registration or car’s logbook.
- General condition: The depreciation rate of any car is affected by the car’s damages to the interior, exterior and bodywork.
- Service history. A car that has never been taken for servicing has a higher depreciation rate than the one with a complete service history. Check on the service book for receipts or stamps to know the service history of the car you want to purchase.
- Length of warranty: A car with more than three years of warranty is good. This means that its depreciation rate as per the manufacturer is lower during that time because it is covered by a warranty.
- Desirability: This also depends on the customer satisfaction surveys. Some car models need to be face-lifted every year, while some may take more than 10 years.
- Size and Class: Big luxury car models tend to have a higher depreciation rate than smaller cars. This is because the cost of fuel and maintenance of big luxury cars is more compared to that of small cars.
- Fuel economy: Cars that run more miles but uses less fuel are said to depreciate less compared to those that use more gallons per mile.
Tips for minimizing depreciation
- Do your research well before buying a car.
- Buy a used car with less mileage to avoid the steepest depreciation.
- Take your car for serving regularly. Cars with a complete serving history give buyers trust.
- Reduce your car’s mileage per year.
- Repair any damage on your car as soon as possible.
- It is better to lease a car rather than owning it. There is no need to worry about depreciation because it is built on your monthly payments.
- Sell your car before a new model arrives in the showrooms.
- Sell your car at the right time of year. For example, during winter you will get more cash for your 4×4 as compared to selling a convertible.
- Choose the right car body options when making a purchase.