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 As well as that, as a car gets older it gets outdated.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.
Mileage
The final big influence over vehicle depreciation is mileage. Low mileage cars are seen as having more life left in them, so are more valuable. Higher mileage cars are seen as coming with more expensive maintenance requirements, so are less valuable.
Don’t let that influence how or where you drive your car but bear it in mind when calculating the resale value when you’re preparing for an auto loan.
Servicing and maintenance
Maintaining the service schedule can also help slow down depreciation. A car with a full service history is seen to have been well looked after and should have a higher value than the same car without a service history.
The same for maintenance. Keep the car well maintained and in good condition and the value should reflect that. This is especially true if you keep receipts for any work you have done on the car.
Vehicle condition
As well as maintenance, a car that’s kept in good condition will also have a higher resale value than one that doesn’t look so good. Trading in a car in poor condition means the dealer will either have to pay to have it improved or take a lower price at auction.
A car in poor condition will also be harder to sell on the private market, so will have a lower value.
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