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What is car depreciation?

We’ve all heard of car depreciation, but what exactly is it?

Well, it is the difference between the value of a car when you buy it, to the value of it when you sell the car. The scale of the depreciation can be influenced by the make and model of a car.

High end, luxury, expensive cars will have a higher depreciation value, as it costs more to run and repair them. Whereas smaller, cheaper cars cost less to repair and run, resulting in a lower depreciation value, making these cars generally more popular.

Other factors that affect the rate of car depreciation include:

Mileage

The more miles a car covers a year, the less it will be worth.

Number of owners

The less, the better.

Condition

No one wants to drive a car that has lots of dents, scratch marks and rust marks, let alone an unkempt, dirty interior with rips and tears in the trim. Throw in an engine that has been thrashed and dodgy electrics too, and you’d be looking more at a scrap heap than a prospective buyer. When looking at buying a new car always inspect it carefully, inside and out and ask if it has been involved in any incidents.

Service history

Having a full service history with receipts and the book stamped by a main dealer will always show the prospective new owner that the car has been looked after well, And could help maximise the resale value of your car

Fuel economy

The more miles you get per gallon the better. Why? Quite simply, the bigger the fuel consumption, the more money you have to spend, resulting in less fuel efficiency.

Popularity

If there is a long waiting list for a brand new car, or if a specific used car is popular, then the depreciation will be lower, as there is an increase in demand/popularity. This could often signal that it is reliable too.

Warranty

If the car still has warranty when you come to sell it, this will be a big bonus to the future owner and will lower the depreciation value, often making the selling price higher.

Generally, in the first year of a new car it will depreciate anywhere between 15-35%. The value can further decline up to 50% or more over the next three years. CAP Automotive suggest not to always buy a car just based on its fuel efficiency, but to look for a car that will hold its value, acknowledging a multitude of various aspects.

At the end of the day, cars are one of those items where it is rare to make money when selling them on. However, with the above pointers, there are ways to help the depreciation value from catastrophically dropping when it comes to selling, particularly if you choose to look after your car.

Want to know more about selling a car, or buying a used car? Get in touch with one of our experienced specialists at your local branch for more information.