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Monday, September 20, 2021

Car Depreciation: What is it and how can I minimise it?

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Depreciation is a scourge of many a car owner – especially those who opt to pay for their motor in full upfront.

Unlike a house, that you can renovate and hope to sell for a profit, the same is almost impossible with cars.

So, let’s take a look at the mechanics behind depreciation, and how you can look to get the better of it as a car owner.

What is car depreciation

Car depreciation is quite simply the value of a vehicle dropping over time. In fact, if you buy a new car, it is estimated that it will lose a significant chunk of its value the very second you drive it off the dealership forecourt.

Again sticking with brand new vehicles, three years down the road are expected to lose 50% of their value three years into ownership – if not more.

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It’s not until eight to 10 years of ownership that a car’s value will start to plateau.

How to minimise car depreciation

Depreciation is strongly linked to how you drive the car. A more aggressive driving style will wear down the moving parts of a petrol or diesel car quicker and make it lose its value much faster.

So, driving smoothly and safely is advised, as is fixing any damage that your car does sustain before it becomes too serious.

Some other ways to counteract depreciation include:

  • Take out GAP insurance on new models. While this doesn’t protect you when it comes to reselling, it will protect your investment if you are in an accident and your car is written off.
  • Look at lease deals, rather than buying. PCP or PCH deals will give you the option to hand in your car at no cost at the end of the deal and start all over again with a new motor.
  • Maintain a full service history. Not only does this show up potential faults before they become a real problem, but evidence of this can help you recoup more when it comes to selling.
  • Buy an older car. Do you really need the most up-to-date model? If resale value is important to you, then buying a car 8-10 years old will give you a much better chance of recouping a greater portion of your investment.

Cars that best hold their value

According to Auto Express, these are the top-10 depreciation-busting cars to buy as new.

  • Lamborghini Urus
  • Toyota Land Cruiser
  • Porsche Cayman
  • Porsche Cayenne
  • Lotus Elise
  • Volkswagen T-Roc
  • Porsche Boxster
  • Range Rover Sport
  • Nissan GT-R
  • Lotus Evora

Lamborghini! Who knew?! It’s certainly a surprising name at top spot, but the SUV offering from the Italian supercar maker was found to retain almost 80% of its value after three years.

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