Last Updated on 19th August 2022
Cars start to lose value as soon as they leave the forecourt with most cars losing between 15 and 30% after just the first year. The rate of depreciation slows after this, but it still means that you are taking a financial hit anytime that you buy new or used and sell down the line.
Why Depreciation Occurs
Cars depreciate due to new cars constantly being released and making these older models less desirable. Depreciation also occurs because cars lose quality and reliability over time, which means that you will get less than what you paid when you look to sell. Although depreciation is unavoidable, there are a few steps that you can take to slow the rate and this could see you recoup much more when the time comes to sell.
Look at Previous Resale Values
If you want to know how much your car will be worth in three or five years, do some research before you go out and buy it. Kelley Blue Book and Edmunds list resale values of models from previous years so that they can give some idea of what different models might be worth down the line. The 10 cars with the best resales every year on the Kelley Blue Book site also come with helpful information on depreciation rates which can help you choose a vehicle that depreciates at a slow rate (and hence maintain its value).
Choose the Right Car
First, you should always look to buy automobiles that retain their value. There are certain brands and models that are known to depreciate at a much slower rate than others, largely due to their desirability. It is worth investing in these cars as they could stop you from losing as much money when you look to sell down the line. Buying used will see you sidestep the biggest depreciation hit and, with a wide range of used cars online, it should not be too hard to find one that holds its value well.
Pick a Popular Colour
New cars tend to retain their value for a long period of time, but the rate at which that value decreases can be influenced by certain factors- including what colour you choose. White, black and silver paint jobs are highly sought after and thus hold their values better than other colours. On the same note, a fluorescent orange car might have difficulty finding an interested buyer when compared to more conventional options because it’s not as popular among buyers. Keep these things in mind before buying a vehicle – or painting your current one with bold colours – to ensure that you’re making the best decision for yourself!
Buy a Used Car or lease
If you’re looking to buy a pre-owned vehicle, sticking with something that may be just one year old can help reduce the amount of depreciation. The previous owner has already taken the biggest financial hit so it will be easier for you and still save money in comparison to purchasing a brand new car. Leasing includes the depreciation cost of the car so you can get a good deal on leasing if the car’s resale value is more than the buyout price at the end of the lease contract.
Protect the Vehicle
Protecting the vehicle can also help to slow depreciation. Imperfections will deter potential buyers and give them grounds to negotiate a lower price, so you should wash the car frequently and consider using PPF to protect the paintwork.
Maintenance & Servicing
As you might expect, keeping the car in the best possible condition is also important for preserving the value as much as possible. This means that you should be conducting basic car maintenance throughout the year and getting it serviced annually. You should also keep hold of receipts, invoices, the service history and any other documentation to help with the value of the car.
Keep the Mileage Down
Cars with fewer miles on the clock will always sell for more, so you should try to keep your mileage down if possible (this will also keep the car in better condition). You could look to walk/cycle or use public transport instead, which would also help to lower your car running costs too.
Sell Your Car at the Right Time
Sell your car after gauging the market! For example, you’ll probably get less for a convertible during wintertime. Also, if the manufacturer just discontinued or updated the model of your car it may have a lower resale value.
Every motorist needs to be aware of depreciation as it can see you lose out on a large sum when the time comes to sell your car. Fortunately, there are ways to slow down the rate of depreciation by choosing the right car, keeping it in the best possible condition and keeping your mileage down and hopefully this will help you to maximise the resale value.