Before you buy any car you might want to do your homework to find out what the potential resale value will be after a few years. Depreciation is the main factor that affects a vehicle’s resale value and like death and taxes, it is one of those certainties in life that you cannot avoid. Luckily there are ways to “lessen” the effects of depreciation on your vehicle. Most cars lose around half of their value in the first three years of ownership. How much your vehicle depreciates depends on a variety of aspects, which can be broken down into three categories, namely; quality, running costs and price.
Nowadays people may argue that the quality of a car is more a personal choice than a perfect science, but thanks to modern influences, like the internet, cars have a generally accepted “quality” attached to them which affects the resale price. A perfect example of this is the fact that Japanese cars keep their value for longer due to their proven reliability compared to other vehicles from North America and Europe. It can also be argued that all modern cars are built to last using quality materials and methods, so it is possible to pick up a bargain on cars that previously had a negative perception.
Running costs is the next important factor to consider. Larger cars, especially those with big petrol engines, will suffer the most when it comes to depreciation. The price of petrol is slowly, but surely rising all over the globe, so bigger cars that are seen as “gas guzzlers” depreciate the most. The cost of services and parts are also a big factor. French cars, for example, are expensive to service outside of their maintenance plans because their parts are expensive. As a potential buyer, you should consider the difference in actual cash between the depreciation of 50% of a small car and a large, luxury car.
So how can you mitigate the effects of depreciation? Well by keeping these mentioned factors in mind before buying is a good start. Buying a demo model or used car will lessen the effect of depreciation as the car would already have depreciated to a degree, but you may lose a significant portion of the maintenance plan. By doing research on the cost and availability of parts as well as the service levels offered by certain manufacturers will help you make the best choice. Lastly, remember to get a new insurance quote at least every year as your car depreciates to save on your premium.