New Car Depreciation: What it is and How to Reduce It

New Car Depreciation: What it is and How to Reduce It

Posted on October 28, 2022

If you're buying or have recently bought a new car then you’ve probably heard the word “depreciation” thrown around. It’s a big word which probably means it's important right? It is! And this article will explain what it is and how you can take steps to reduce it.

What is New Car Depreciation?

A basic definition of depreciation is that it’s the value something loses all the time. It’s not specifically a car term, just a financial one generally. For our purposes though we’ll focus on cars.

Depreciation primarily affects your resale value. If you're planning to buy and trade up later, it’s key that you think about the depreciation.

You probably know that cars lose value over time. This is due to a couple of factors. Number 1 that as cars get older they get less reliable. The value goes down as maintenance goes up. As well as that, as a car gets older it gets outdated. Newer models will have newer gadgets and gizmos.

There’s math you can do to calculate the new car depreciation. Luckily though, there's places that do that for you.

There’s a whole host of other factors to consider also: Mileage, fuel efficiency, the make and model, general condition.

Not all of these can be controlled. You can’t stop the car from getting older unless you’ve got some secret time control powers. But there are a few things you can do.

Things To Consider Before You Buy

Here are the things to watch out for before you buy if you’re concerned about the depreciation value.

Certain manufacturers and vehicle types depreciate slower than others. At the moment pickup trucks depreciate slower than most because they’re highly sought after. However, that may change. There are many online resources you can use to figure out a brand's average depreciation.

The Colour of your car can affect resale value too. This effect is different depending on who you're trying to sell it to though. So it’s a bit difficult to factor into the depreciation value. If your car is hot pink for example. Most people will be less likely to buy it, but someone who desperately wants a hot pink car will be willing to spend higher than average.

Always remember the optional extras too. What people are looking for will change over time but if the car has things like wireless bluetooth, reversing cameras, heated seats, these will greatly affect resale value.

Things To Consider After Buying The Car

After buying the car there's still some things you can do to lower the depreciation rate.

If you are able to drive less. That will have a positive impact on the car's resale value. Since mileage is a common way to calculate a car's value. Driving less also means the car’s less likely to get damaged or dinged up.

Regular maintenance can also lower the depreciation rate since you’ll be able to prove on paper that the car’s been well looked after.

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