Car depreciation is one thing that many car buyers tend to forget.
We all know that cars depreciate, ie lose value after buying, but do you know how much? Some cars depreciate much faster than others, for example. It is a very important factor when buying a new car. When you’re doing your budgets, depreciation should be an important consideration.
At some point in the future, it is likely that you will want to sell the car on or part exchange. Very few of us buy a car and keep it forever. With that in mind, the resale value is vital. A high resale price means that you can afford a better car next time around.
It is impossible to beat depreciation entirely. When you drive a brand new car off the forecourt it instantly loses between 15-35% of its value. This is because it can no longer be considered new. This is a price that all new car buyers incur. In general, cars will lose roughly 50% of their value over the next three years. However, there is a way to slow this rate down. You can control the amount of value lost on a car.
There are a number of factors that affect resale value. Some of these are uncontrollable and are specific to the car model. For example, a car’s fuel efficiency, desirability and placement in the model cycle can all affect value. These are aspects over which you have little control. Desirability of cars changes over time and fuel economy is something that is built into the car itself.
Then there are things that you do have control over. The mileage plays an important part in resale value. So does the condition of the car. When it does come to selling it, the way you sell it can make a big difference. Even the time of year can alter the price. In order to ensure the best resale value, you should consider the following things.
Before you buy
As I mentioned, some value factors are specific to the model itself. The only way you can control this is by choosing correctly in the first place. There are no hard and fast rules here, but there are some consistent themes to look out for.
Reliability is a very important factor when it comes to resale. Every service or repair is a black mark on your car. Limiting the number of visits to the garage is very important. Once sure fire way to avoid this is to buy a notoriously reliable car. German cars, in particular, hold their value better than most others. When looking at cars that depreciate slowly, Audis, Volkswagens and BMWs dominate the lists. This is because they are good quality, reliable vehicles.
When it comes to buying a car that depreciates slowly, there is a sweet spot to be found. Desirability and demand plays a big part in resale value. With this in mind, mid-range cars hold their value better than any others.
Good quality, mid-range cars are dependable and reliable, yet they are also in heavy demand. Their desirability doesn’t fluctuate too much because they are always needed. Similarly, the models are very rarely replaced. Cars like the Audi A3, Mini and BMW 5 Series retain value very well. BMW aren’t about to discard the brilliant 5 Series and Audi will always retain its A3 and A4 range. Although cheaper cars save you money when you buy, they do depreciate faster. Models are replaced quicker and they become outdated fast due to their lower specs. They are also a little less reliable and many services will impact the resale value.
At the other end of the spectrum, luxury cars depreciate fast. The demand is lower and they are subject to wild changes in desirability. When buying supercars, it is all about what is hot right now. Supercars and luxury cars are outdated within two years. Unless you bag a future classic, expect to lose a lot of value on Bentleys and Aston Martins.
Finally, look for good fuel economy. This is the single most important factor when it comes to buying used cars at the moment. The current culture of driving demands green technology, clean engines and good mileage. It is one of the most prized criteria in used cars. On used car sites like cardealwarehouse.co.uk, the diesel and hybrids cars hold the most value.
After you buy
So, we’ve established that you should buy a reliable mid-range car with good fuel economy. It should be expensive, but not too expensive. It should be dependable and part of a stoic model range. Now, it’s time to make sure you don’t lose any further value on it. Once you’ve bought a car, the biggest factors in depreciation lie in condition and mileage.
In order to command the highest possible resale price, you must keep the car in good condition. That means regular checks and services on your part. Keep all the small parts in good working order. By this we mean check the fluids weekly. Check tyres, brakes and engine parts monthly. These will all keep large problems at bay. Once there is a big repair on the service history, you instantly lose value. On the other hand, regular services like oil changes show good care and attention. This will increase resale value.
Try to keep the mileage low. Always consider if there is an alternative option to driving. You could cycle or walk to work, or share the commute with a colleague. A car with below-average mileage looks very good when selling on.
Finally, the time and place of sale is more important than you might think. Part exchanging at the dealership isn’t always the best option. Part exchanging works best when the car you want is the same make as your old car. For example, if you are selling a Ford, don’t part exchange at a BMW dealer. The BMW dealer doesn’t specialise in Fords and will probably sell it on. This means they have to offer you a low price in order to make a profit selling it on. Search around for the best place to sell your Ford first and get quotes. You may even have better luck selling privately. The end of the summer is the best time to sell because demand and prices are generally a bit higher. Don’t wait too long however. November and December are the worst times to sell thanks to low demand and low prices.
Depreciation is impossible to avoid. However, you can slow it down. Making the right choices when buying and keeping the car in good condition is key. Make sure you don’t lose out further down the line.
