Car Depreciation Facts and Ways to Manage It
- April 19, 2017
- Car Tips
- Posted by carlot831
- Comments Off on Car Depreciation Facts and Ways to Manage It
Are you planning to buy a car? Deciding whether to go for a used car or a brand new one? Do you know the top factors you should consider to make sure your purchase is worth the price? Have you thought about car depreciation? Do you know why some brands are considered the fastest depreciating car brands?
In this article, you will learn important facts about car depreciation and why you should highly consider it when looking for a car to buy.
What is car depreciation?
Car depreciation is equal to the value of the car when you bought it minus its current value when you want to sell it.
It is actually the biggest cost of running a car and not fuel consumption, as many would think. In fact, research shows that depreciation is three times more expensive than what you can spend on fuel.
In general, cars decrease their value as years pass by from the moment they have been manufactured. The older they get, the less value they will have.
“Typically witihin a year, a car depreciates by 15-35%, and by 50% or even more after three years.”
However, there are other factors affecting car depreciation, not to mention car engine efficiency and the amount of road tax payable. And most of the fastest depreciating car brands will have one or two of these.
Other factors that contribute to car depreciation and how to minimize it?
1. Mileage – How far has your car traveled from the time it came out of the dealer’s showroom? Check it through its odometer. The more miles there are, the less your car is worth.
Tip: Maintain an average mileage of 10,000 to 15,000 miles a year. Keep it below the average.
2. General Condition – Aside from the usual wear and tear, has your car experienced any other type of damage? Are there dents or scratches to its exterior? Are there any broken parts? Any damage to the car as well as the degree of signs of usage can contribute greatly to the drop in value.
- Keep your car regularly maintained. Repair any damage at once before it gets worse.
- Keep all your car documents safe. Service records must contain stamps or receipts that show servicing in line with the manufacturer’s recommendations.
- A well-maintained car with full service history provides peace of mind to your future perspective buyers.
3. Reliability and Warranty – Does your car belong to those with reliability issues? Some brands or specific models that failed to satisfy customers are much more difficult to sell at a higher price even when they are relatively new.
Tip: If your car has longer warranty, it can be a great tool to bargain your car at a more favorable price.
4. Number of owners – this can can be checked through the vehicle history report or VHR. The fewer number of owners a car has, the better.
- Research thoroughly before deciding to make your final car purchase.
- Explore reports and other resources such as the car’s VHR. You can also do autocheck seamlessly through the internet by simply using vehicle identification (VIN) or the car’s licensed plate number.
5. Installed upgrades and other added amenities – You might think that added features for comfort or better performance such as tire covers, stereo, LCD screen, and a navigation system would possibly increase the car’s value. Well, it’s not always the case. Remember, these options depreciate in price, too.
Tip: Minimize adding options. When you add one, make sure it will be beneficial to potential buyers when you want to sell it no matter if they decrease in value years after you have installed them.
6. Car color, Size, and Desirability
Standard and neutral colors like white, grey, black and red often get a larger market of perspective buyers. Subjective colors, on the other hand, may be a turn off to some (if not many) car buyers.
When it pertains to size, smaller cars hold their value better than big luxury cars. Big cars are more costly to run and maintain so they depreciate more.
When a car model is replaced every few years, older models depreciate quickly. More buyers would want the more recent model.
- Stick to popular, neutral colors.
- Know when is the best time of the year to sell your car. Convertibles are more in demand in summer, while the 4x4s are more popular in winter.
- Be updated with what’s happening in the auto industry so you can sell your car better before its replacement model becomes available in the market.
Different makes and models also contribute to a car’s annual rate of depreciation. Know how well your chosen car will hold its value. If you want to re-sell it in the future and still get a decent price, focus more on depreciation rather than fuel efficiency. Choose car brands that hold their value well because they deliver better in terms of savings. If you’re buying a pre-owned car, inspect it carefully.
Cars lose value with each passing month and mile. With a used car, there’s no depreciation hit the second you roll off the lot and you aren’t overpaying for your vehicle. Check out The Car Lots huge selection of cars today!