What You Need to Know About Vehicle Depreciation

What is depreciation? In the car world, it is the difference in the vehicle’s value when you bought it and its value after a certain period time. This drop in value is different for each make and model, but typically is in the 15% to 35% range during the first year, and up to 50% or more over the next three.
Factors That Affect a Car’s Depreciation Rate

  1. Mileage – The average mileage for most cars is 10,000 miles per year. The more miles the vehicle accumulates, the less value it has.
  2. Reliability – Some cars simply have a reputation for being a lemon. They might offer more value during their first year, but that number drops significantly as soon as the problems emerge.
  3. Number of Previous Owners – Everyone who has owned the car has had the opportunity to bring its value down every time it was bought and sold. The fewer former owners a car has, the better. It helps to check the car’s logbook or its V5C registration to see how many people have owned it.
  4. Vehicle Condition – Any damage to the car’s interior or exterior will reduce its value, because the next owner will have to spend money on repairs. Be sure to check for damage before buying.
  5. Service History – The more complete a vehicle’s service history is, the better. It’s service book is a reflection of its history, and it should have stamps or receipts that show servicing in line with the manufacturer’s recommendations.
  6. Warranty – Vehicles that have at least three years left on their warranty have higher value. Some manufacturers such as Kia even offer transferable warranties that cover up to seven years.
  7. Novelty – Some cars stay the way they are for years, while others are replaced or improved by the manufacturer every so often. Newer models have a better chance of holding their value over time.
  8. Size – Larger, more luxurious vehicles tend to depreciate faster because they cost more. They are also more expensive to operate and maintain.
  9. Fuel Economy – One of the reasons why diesel vehicles tend to hold their value better than their petrol counterparts is fuel economy. The more miles per gallon you get, the better.

10    Road Fund License – Cars that have high fuel consumption cost more to tax each year, making them less desirable in the second-hand car market.

 

How to Keep Vehicle Depreciation to a Minimum

Here’s what you can do to lessen the impact of depreciation on your vehicle and make use of it for a very long time.

  • Keep mileage low.
  • Take good care of your vehicle.
  • Repair any damage as soon as possible.
  • If possible, buy a more recent car model.
  • Avoid racing modifications such as spoilers, wide rims, and flared wheel arches.
  • If you need to sell your vehicle, wait for the right time of the year. Convertibles are popular in the summer while 4X4 off road vehicles sell well in winter.
  • Do not repaint with outrageous colors.
  • Consider leasing instead of owning. This way, you won’t have to worry about depreciation as it will be included in your monthly statement.
  • Look up how far a car’s value has gone down before buying.
  • Have the right features like metallic paint and leather interiors for executive cars or a GPS system and air conditioning for regular everyday vehicles.
  • Keep your car’s complete service history.
  • If you can, sell your car before its replacement model hits the showrooms.

 

At the end of the day, vehicle depreciation is inevitable. But follow the tips mentioned above and you can stave it off and get more value for car when you decide to sell it.