What causes cars to depreciate?

A lot of factors cause cars to depreciate over the years, but when is the best time to start thinking about it? And what can you do to prevent it?

Imagine: you’ve just sat down to test drive a new car – it’s shiny, it’s comfortable, it’s fast and it has that wonderful new car smell. You can’t wait to take it home! You don’t really want to think about it, but this is the time to consider whether or not you’ll be able to sell the car on in a few years.

What is depreciation?

Depreciation means the car loses its value over time. Some level of depreciation is inevitable, unless you’re ready to spend a lot of time and money on modifying it and adding improvements. As a car gets older and is becomes more ‘used’ than ‘new’ the value of the car will drop significantly. Some estimates suggest that cars lose between 50% and 60% of their value in the first three years of ownership – not a good thing if you’re thinking about selling it on.

Here are the top factors that affect depreciation:

• Mileage – the average is 10,000 miles a year. The more miles you drive, the less your car is worth.
• Reliability – some cars and makers have a reputation for unreliability, and past experiences may deter buyers from your vehicle.
• Number of owners – fewer owners means better resale value. Check your car’s logbook or the V5C registration to be sure of how money people have owned your car.
• General condition – damage to the body, interior and exterior will reduce value immediately.
• Service history – a complete service history will be a great bonus when trying to sell on your car.

Other factors may come into it too; whether that model of car is desirable, how big it is (bigger cars tend to depreciate more than smaller cars), the MPG rate and whether the car itself is desirable. Simple things like the colour of your car can really affect how much you’ll be able to sell it on for.

What can I do to make sure that my car doesn’t depreciate?

As stated earlier, depreciation is inevitable, but there are things you can do to soften the blow:

• Do your research before buying a car; check motoring websites for car depreciation tables and driver reviews for a general sense of the car, then check the service history and mileage on the specific car you want.
• Buy a car that’s more than three years old. Nearly-new or used cars are best as they will have already depreciated that 50%, so you won’t lose as much money as buying it new.
• Maintain your car well. Keep a full service history, keep it clean and keep it in good shape. If you can keep the mileage down too that will only help you when selling it on.
• Sell your car before the replacement model arrives in the showroom; it won’t be worth as much once the new version comes out.
• Avoid ‘boy racer’ modifications that may turn some drivers off. Outrageous colours and paintjobs are also a no-go if you’re considering reselling.

Always think about your future buyer when dealing with your car. Someone else driving your car is not something often thought about, but if you do you’ll save yourself money by having a car that has not been so affected by depreciation.

For more information on new and used cars, contact your local Perrys dealer.