It’s no secret that new cars depreciate at an eye-watering rate. But is there anything you can do about it? Do some cars fall in value more rapidly than others and are there things you should or shouldn’t be doing with your motor to help protect its value? We take a look.
What actually is depreciation?
Depreciation is defined as the difference between a car’s value when you buy it and when you decide to sell it. Depreciation is not regular throughout the life of the car but on average, is about 15%-35% in the first year and anywhere up to 50% over the first three years. Some cars depreciate in value more than others so whilst you might be looking at fuel economy as one of your top priorities when it comes to financial efficiency, don’t overlook depreciation. If you buy a vehicle with great fuel economy but high depreciation, then the money you save on fuel will be completely swallowed up by the amount you lose on depreciation at the point of sale.
Ignoring make and model, why do some cars depreciate more than others?
There are some factors which apply to all cars and which can seriously make or break your depreciation, worth considering whatever the current value of your vehicle:-
- Service history – a complete service history booklet with all the stamps is worth its weight in gold. Make sure servicing is done totally in line with the manufacturer’s guidelines if you decide not to use a main dealer
- Mileage – the higher the mileage, the greater the depreciation. Work on a comfortable average of £10,000 miles a year
- Number of owners – If a car has changed hands on a regular basis, most potential buyers would be suspicious of its general roadworthiness and reliability. Remember, you can check the number of previous owners from the V5C registration or logbook
- Fuel economy – the more economic the better
- General reliability – your car might be the exception that proves the rule but if the make and model are deemed to be unreliable based on reviews and contributions in the media and online then this will certainly have an impact on the car’s value
- Overall condition – a car that has been looked after and kept in good condition is always going to hold its value better than one covered in scuffs, scratches and the odd dent – this applies to the interior and the exterior
- Smoking – if you are a smoker then there will be a lingering odour and residue in the vehicle which can make a private sale difficult. Cigarette smoke can actually cause physical damage to the interior, becoming engrained in the upholstery and trapped inside the air con. It can require specialist equipment to remove all traces of smoking and this is not a cheap process
- Remaining warranty – unused warranty is always attractive to prospective purchasers so if you buy a new model with a seven-year warranty and most cars nowadays are around five years then you should have a good chunk left to pass on to a new buyer
- Desirability – manufacturers which update models regularly can take the shine off older versions which can appear dated and old-fashioned by comparison. If you own a car which has not undergone many facelifts then your own model will retain a better value
- Small is better – small cars hold their value much better than larger ones which are considered to be more expensive to run and to repair – parts often cost more than on smaller vehicles. They are also perceived to be more harmful to the planet
- Road tax – there are some 4x4s which have eye-watering annual Road Fund Licence whereas newer, greener motors will be much cheaper to tax
Some of the items on this list, car owners can do little to assuage once you own a vehicle but you should consider depreciation as a serious factor before you make a purchase. Always have in mind how long you think you will need to keep the vehicle and what sort of closing mileage you will be selling it for.
Be a good owner
- Try and minimise mileage if possible – this can be difficult but for the sake of fuel economy and the environment, keep a diary over the course of one month and have a look at how you use the car. Can you double up on some of those journeys? Don’t make trips further away to pick up just one thing – wait until you need to go there for several reasons. Intelligent motoring can shave miles of your car each month and considerably lower your fuel bills, one of the few financial elements of motoring costs you can control
- Keep your car in good order, don’t leave repairs for any longer than is necessary and make sure bodywork is always in tip-top condition
- Buy a used but nearly new car; a low mileage almost new car is a great way to avoid the ‘ouch’ of depreciation
- Don’t add modifications, you will considerably limit the market of potential buyers when you want to sell
- Don’t choose an outrageous or unusual colour, stick to the popular, all-time favourites of silver, grey, black and white
- Do your homework. If you have a make and a model in mind then go online and see how much similar vehicles have dropped in value
- Keep your gadgets mainstream – sat nav and air conditioning are essentials now for most people rather than extras and they will expect them on your car
- Keep a folder of all your paperwork for new tyres, repairs etc – your service booklet should demonstrate the car’s full service history
Time your sale
One of the biggest influences you can have over the value of a car is selling it before the new, smarter and more economic model hits the showroom. Keep an eye on industry magazines like What Car? and online information from the manufacturer. Remember, sports cars and convertibles always sell better in the summer and 4x4s in bad weather or in the winter. Time of year doesn’t mean a higher price but more buyers will mean you can market your car at a strong price and hopefully, not end up having to accept any offers.