It’s common knowledge that any new car you take delivery of after signing on the dotted line will depreciate the second you drive off the showroom floor.
But exactly how much does your ride depreciate over time?
That depends on a myriad of factors, including the make and model as well as how well you look after your car.
According to Mark Ridgway, Chief Technical Officer at GetWorth, an average car is likely to depreciate by around 10% the minute you take ownership. Because once it’s classified as used, it’s used.
After one year of ownership, a car should depreciate by between 15% and 20%. GetWorth data suggests, while five years should take off around 30% to 40%.
Transactional factors, such as the difference between trade-in and retail value after the used car dealer’s mark-up, can take a further 10% off the equity that the owner has when it’s time to sell.
“The new car hit is a big one. Used cars depreciate less. If you bought the car above at the one-year mark, you only suffer half the depreciation the first owner did,” Ridgway said.
Used car retail giant Auto Pedigree says the average car can depreciate at a rate of anything from 15% to 30% per year, although it concurs with GetWorth that the highest value plunge is in the first year of ownership, with the depreciation rate gradually decreasing as the car gets older.
However, most new car buyers should expect their vehicle’s value to halve within five years, Auto Pedigree says.
Cheaper cars hold their value longer
GetWorth, which provides used car pricing data to customers, has noted some interesting trends over the years.
For instance, affordable entry-level models tend to hold their value better, and in fact fuel efficient vehicles of all types have a resale advantage over less economical types.
Conversely, luxury cars generally depreciate faster.
Brand equity also plays a huge part in resale value, GetWorth says, with brands that are perceived as being reliable, such as Toyota, enjoying a resale advantage. The same applies to any make and model for which there is a high demand.
“You can’t stop depreciation, but you can make careful upfront choices and you can slow it down,” Ridgway says.
“Upfront, consider the factors above, but also make sure you pay the right price. If you are buying a new car, look at the prices of the one-year-olds in the market so you have an idea how much value that model might lose.
“Even for a used car, compare prices. If you pay above the market price, you won’t recover the difference. With a used car you also need to pay attention to quality and condition.
“My personal preference is to hunt the lowest mileage car I can find in top condition from a reputable dealer.”
Ridgway also advises motorists to limit the mileage they put on their cars, where at all possible, while maintaining its mechanical and cosmetic condition as well as possible should go without saying.
