Slow down car depreciation!

Depreciation on a car is simply the difference in the value of a vehicle from when you bought it to when you sell it.

How much cars depreciate in value varies widely from model to model. By far the biggest depreciation happens when you buy a new car, which can drop thousands of pounds the minute you drive it from the showroom.

But be careful! Focusing on just the new purchase price when you pay for a new car might disguise the chance that a pricier car with excellent residuals could cost you less over a number of years than a cheaper car which massively drops in value in just a couple of years.

Buy slightly used

If you really want the appearance of a brand new car, buying an ex-demo model from a garage or a car under a year old will save thousands of pounds in depreciation. The value of most cars will drop by anything from 15% to 40% in the first year on an average mileage of 10,000 miles. By the third or fourth year most vehicles will have lost around 60% of their new value. But depreciation slows with the age of a car and cars over five years old will lose little value over the next few years because of their age. At this point the value will be reflected by their mileage and condition.

Buy wisely

Because all cars depreciate differently it is worth doing your homework before you buy a particular model. There are a number of factors other than age that affect depreciation so it is worth researching residual values and running costs.

Certain manufacturers such as Volkswagen and BMW tend to hold their values better due to the perception of quality and reliability. Running costs and CO2 emissions may also play a part as fuel costs and road tax bands make some cars more attractive to those on a tight budget wanting a car. Changes to the styling of models by manufacturers can also affect values, making a car look old and outdated before its time.

Keeping up values

Once you have settled on a model of car, there are a number of ways you can minimise its depreciation in the future. The most effective of these is by keeping the mileage as low as possible. High mileage cars are not attractive to buyers. Keeping up regular servicing – and maintaining good records of this – will help to prove that the car has been well looked after and therefore will be more saleable, giving you a better deposit or trade in value when financing a new car.

If you have a garage or car port, use it. Sun and rain take their toll on paintwork and can drastically age the look of a car. Regularly washing and waxing the paintwork will also preserve the appearance and help maintain its value. Seat covers, especially if you have children or dogs, will protect the interior of the car and can be easily removed when you come to sell to reveal a much tidier interior. Similarly, boot liners and dog guards can help protect the interior from scuffs and tears. Modifications are also inadvisable as they can increase insurance premiums and put off potential buyers.