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

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

If you're buying or have recently bought a new car then youā€™ve probably heard the word ā€œdepreciationā€ thrown around. Itā€™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 itā€™s the value something loses all the time. Itā€™s not specifically a car term, just a financial one generally. For our purposes though weā€™ll focus on cars.

 

Depreciation primarily affects your resale value. If you're planning to buy and trade up later, itā€™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 As well as that, as a car gets older it gets outdated.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.

 

 

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

 

Thereā€™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 canā€™t stop the car from getting older unless youā€™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 youā€™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 theyā€™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 ColourĀ of your car can affect resale value too. This effect is different depending on who you're trying to sell it to though. So itā€™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.

 

Depreciation by colour

 

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.

 

Donā€™t let that influence how or where you drive your car but bear it in mind when calculating the resale value when youā€™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 thatā€™s kept in good condition will also have a higher resale value than one that doesnā€™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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