Depreciation is like a stealth tax – it creeps up on you and strikes right at the end when you decide to sell your car. It’s the single biggest motoring expense and, according to AA figures, is a higher part of a car’s ‘pence per mile’ cost than fuel. It’s likely to account for at least half your motoring costs over the first three years of ownership.
One of the best ways to avoid large depreciation is simply not to buy new at all. If you buy ‘nearly new’ – from a few months to a year – then the original owner will have taken the biggest depreciation hit.
To provide you with a graphical view of how depreciation can change the valuation of your car, we have provided an example where we examine four cars of different values at the age of zero days;
- Executive Saloon that originally cost £85,000
- A premium Car with an original price of £55,000
- An average priced car that is purchased at an original price of £35,000
- A small car that had an original price of £15,000 when brand new.
What we are able to see here is that their is a 20% fall in the cars value every year and that the car that loses the most money is the Executive Saloon. Perhaps, by showing the amount the car loses each you will see the cost of driving different cars and their relative depreciation values.
If you want to buy the best car for depreciation relative to your requirements, the following may help:
Model and Type Of Car That You Have
Whether a certain car is in demand new will affect the residual value (the difference between the cost new and the depreciation that has taken effect). If there is a high demand for the newer model along with a wait to be able to get hold of the new model, then used versions of the previous model will certainly hold their value for a longer period of time.
On the other hand, if a car is in ready supply and being discounted strongly, then used versions will depreciate sharply.
Engine Size And The Fuel Type Of Your Car
The type of engine will have an affect on residuals – the largest petrol engined version of a big saloon or off-roader will likely depreciate more than a smaller petrol version or the diesel variant. In general terms, diesels tend to depreciate at a slower rate than their petrol equivalents, although they may cost more in the first place.
That said, it’s important to keep an eye on current trends. Petrol engines are becoming more and more fuel efficient and environmentally friendly, so the residual gap may narrow in time.
The Make And Model Of Your Car
Like it or not, the badge on the bonnet can make a difference as branding is a huge factor in people’s buying motives. While you may feel you’re paying extra just for a certain badge, there’s an argument that a prestige brand may end up being more cost-effective to own in the long run due to the way depreciation can devalue a car at different rates.
For example, let’s say a prestige car of a certain type is worth 45% of its value after three years, but the ‘bread and butter’ branded car only holds 30% of its value over the same period. If you do the maths you may find the prestige car leaves you in a better financial position when it comes to changing cars and the residual value left.
True the ‘bread and butter’ branded car will likely have cost you less to buy initially, but it pays to look at overall costs not just the initial purchase price.
If you are wanting to know how much your car is valued by our valuation team, then give us a call on 0330 900 1313 for a rough estimation.
Optional Extras That The Car Has
You will normally find that cars that significant extras added to them when they were originally purchased, or they now have a lot more added extras that they have added to them over the years will obtain a higher valuation when compared to the standard model of the car.
For example, leather upholstery might enhance a car’s value if its a large executive prestige saloon like a Mercedes or Jaguar, but may not make much difference if it’s a smaller car such as a supermini. Likewise, a car that had a fitted satnav, run roof video camera parking sensors will certainly be valued at a much higher premium then when compared to the standard model.
The Colour Of Your Car
If you are Katie Price (formally known as Jordan) and you have a a selection of pink coloured cars they might have suited you, but when it comes to resale value, Katie may find that their resale value is a far lower then she realises. It is all to do with the demand for certain colours of car and pink is not top car colour surprisingly. When it comes to the best colours for your car, the main choices are silver, white and black for price longevity.
Mileage And Condition Of Your Car
If a car has a higher or lower mileage than is expected for its age, then this will affect values up or down. Used car guides such as Glass’s and CAP (only available in printed form to the trade, but online valuations are available to all) and Parker’s (available online and in news agents) will show expected mileages for the year and how to calculate if higher or lower.
The condition of the car matters, of course, but allowances are made for the age of the car. Obvious damage such as larger dents and scratches will have to be allowed for in terms of what they’d cost to repair as would any mechanical faults or worn items (cost of new tyres, say).
Service History Of Your Car
A fully stamped service book that has shows that your car has been serviced as per the manufactures guidelines will automatically be valued at a higher value than a car which has not been serviced at regular intervals. Therefore, to make sure that your car does not depreciate at a fast rate and if you plan on selling your car in the future then it is a wise choice to make sure that service intervals are maintained. This is especially important when dealing with a high performance sports car,
Some Food For Thought An How Depreciation Can Affect The Price Of Your Car
The above factors should be taken into account. Various car publications and websites such as ‘What Car?’ and ‘Which?’ sometimes produce statistics and lists of ‘best cars for depreciation.’ If you have a certain car, or cars, in mind then checking used values online is a good way of assessing your options.