A Guide To Car Depreciation

When it comes to buying a car, there are a number of things to consider. Whilst many drivers spend time researching the best cars for practicability, fuel economy, maintenance and insurance costs, we often forget to factor in car depreciation.

From the moment you collect the keys to your new car and drive away, depreciation has already started! The potential decline in value of a car varies across manufacturers and models, new and used cars. But this is something to think about if you want to sell your car in the future. 

In this guide from CarMats.co.uk, we explain what car depreciation is, which factors affect car depreciation the most and how to slow down depreciation.

What is car depreciation?

Car depreciation is the rate at which your car’s value decreases over time. It is the difference between the price you pay when you first buy your car, and the price you would get if you decided to sell it.

Any car will be at its most valuable when it is shiny and new, fresh from the showroom (with the exception of vintage cars or rare and collectible motors). Therefore it makes sense to pay a pretty price tag for it.

But once the car has been on the road and has racked up some miles, normal wear and tear will have affected various elements. Not to mention any cosmetic damage or potential scrapes. All of these things affect a car's value, meaning that if you decide to sell, the value should be expected to be less than you originally paid.

Even if you don’t plan to sell your car anytime soon, depreciation plays a huge factor in running costs, adding more to cost per mile than fuel. So this is definitely something to consider before you buy.

How quickly do cars depreciate?

Most cars lose around 50% - 60% of their original value in the first three years of ownership. As the car gets older, the rate of the depreciation may slow down. 

The highest percentage of depreciation will happen in the car's first year, with new cars losing value as soon as they drive off the forecourt. An average decrease is around 40% but this will vary depending on on the make and model of your car.

By year three, the average car travelling 10,000 miles a year, will have lost around 60% of its value.

Whilst there are some makes and models which are more prone to depreciation, how you use and care for your vehicle, plays the biggest role in the value of your car.

What affects car depreciation?

There are a number of factors which can affect your car's value. These include, but are not limited to:

• Mileage - The higher the number of miles a car has travelled, the less the car is worth. The average annual mileage in the UK is around 10,000 - 12,000 miles per year. Cars which travel more miles than this will depreciate much faster.
• Number of previous owners - It goes without saying that if a car has had multiple owners, it questions the reason for selling. The higher the number of previous owners, the higher the number of people you are trusting to have looked after the car in the past.

• Service history - When buying a car, you want to ensure that the car is safe and has been well looked after. With service history intact, new owners can see exactly what work has been done on the vehicle previously. Not servicing your car properly or maintaining records of service/MOTs, can greatly affect the value of your vehicle.

• Fuel economy - Cars which are more fuel efficient tend to depreciate more slowly because of increased interest in cars which are cheaper to run.

• Road tax - The amount it costs to tax a vehicle may play a part in its desirability. The smaller the car or the newer the car, the less it tends to cost to tax it, making it more appealing to buyers.

• Size and cost - Smaller cars tend to cost less to run, increasing their appeal and keeping demand high. Bigger cars, or luxury cars like SUVs, will originally cost more to buy, which means that their value has further to fall. They also tend to cost more in fuel, parts, and maintenance.

• Brand and model reliability and desirability - Brands with a good reputation for reliability and popularity, tend to have a stronger demand and will usually depreciate at a lesser rate. A car's value is dependent on who is willing to buy it, so the more desirable and reliable a car is, the higher the price people will be willing to pay.

How to minimise car depreciation

Whilst there are many factors which may affect your cars value - such as new model releases and demand for the car when you come to sell - there are a few things you can do to preserve your vehicle and minimise car depreciation:

• Keep mileage down.
• Keep your car in good, clean condition - simple things like using car mats to protect your car's interior will go a long way.
• Repair any damage as soon as possible.
• Get your car services regularly.
• Keep a comprehensive service record.
• Keep all MOT certificates. A full service history gives potential buyers peace of mind.
• Avoid modifications such as spoilers, flared wheel arches and wide wheels - this can put buyers off.
• Avoid buying a car in a bold colour. A quirky shade might appeal to you, but it could put off many buyers when you want to sell your car.
• Buy a nearly-new or used car as opposed to a brand new one to avoid the steepest depreciation
• Sell your car at the right time of year. For example, don’t try to sell a convertible in winter when it’s full features can’t be enjoyed or used .
• Stick to popular colours – an outrageous shade might appeal to you, but will put off many buyers when you want to sell your car.
• Consider leasing a vehicle rather than buying one - when leasing a vehicle, there’s no worry about the car’s depreciation, as it won’t be yours to sell.
• Do your research before you buy – see how much values have gone down on older models and similar vehicles from the same manufacturer.

Remember that an estimate of what your new car might be worth if you decide to sell in the future is exactly that, an estimate. There are many factors which can affect your car’s value but taking good care of your vehicle’s interior and exterior is a great place to start. Find your perfect set of bespoke car mats today!