How Much Is Your Car Worth?
We need our vehicles but unfortunately the amount we spend compared to the amount we get back when sold can seem like a huge drop.
Rumour has it that a new car loses a big chunk of its purchase price as soon as it’s driven off the forecourt. If so, how much does it lose – and do some makes and models lose more than others? And do second hand cars lose value at the same rate?
Welcome to the thorny subject of vehicle depreciation: what it is, what causes it, and more importantly how you can protect the value of your car.
What causes the depreciation of a new car?
- Buying a new car
- Above average mileage
- Age of vehicle
- Replacement models
- Popularity
- Wear & tear
Your new car loses value through use and decreases in value each year after it was purchased. The rate of depreciation will slow until your car reaches what is referred to as a “residual” value, which can be anything from 60% to as little as 40% of what a car cost new. Most cars hit this mark at about three years, which is around the same time as 36-month car finance agreements last.
The rate of depreciation of your car can also be affected by mileage and by general wear and tear. You should keep a record of any damage or repairs done to your car in its service history, to show prospective buyers how you’ve taken care of it; an incomplete service history might affect the price you can resell the vehicle for as it raises questions about what you might be hiding.
Some cars retain more value than others, and some classic cars sell for astronomical amounts of money due to becoming increasingly rare. The opposite effect is felt where numbers of replacement models are released within a product line; this can negatively impact resale value simply because there are an increased number of similar vehicles on the market.
Retaining as much value as you can
- Stick to manufacturers’ guidelines
- Have an impeccable service history
- Maintenance, maintenance, maintenance
- Reduce wear & tear if possible
Trying to claw back some of the value of your car sounds daunting but simply taking care of a vehicle can do wonders – and this doesn’t apply just to new cars but second-hand motors too. Like we said, keep a record of any work done, clearly logged in your cars service history so potential buyers know they aren’t going to get any nasty surprises. Be mindful of regular checks and replacements: tyres, windscreen wipers, oil and so on, so they don’t become complicated (and costly) problems later on.
Lastly, reducing the general wear and tear on a vehicle can help you improve its resale value. Think carefully about when you use the car: do you absolutely need to drive it to the shop at the end of the road? That five-minute walk saves on needless wear to an engine.
Following this advice really will help minimise the hurt of depreciation and help your car keep its value for when you come to sell it, or if you decide to borrow against its value with a Logbook Loan.
If you’re interested in maintaining the value of your car, take a look at the tips on our blog post Three ways to improve your car’s reliability.