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Car Deprecation and How to Stop it

By: Garry Crystal - Updated: 21 Oct 2010 | comments*Discuss
 
Depreciation Car High Mileage Resale

New cars depreciate in value the moment they are driven from the car showroom. But there are some car depreciation issues that can make a financial difference when selling a vehicle.

The Car Depreciation Calculator

Car depreciation is based on a few factors with mileage being one of the main issues. The more mileage a car has undertaken the lower the resale value will usually be. A brand new car’s depreciation value can be assessed over the first three years with an annual 12,000 miles. Seller’s should look at car pricing guides and check the resale value of similar makes of the same age. Take the resale value from the actual price paid and this will give a general depreciation estimate.

Other Car Depreciation Factors

Mileage in the first three years of a car’s life is not the only depreciation factor. The amount of money spent on a car by the owner over a three year period should also be included. Factors such as servicing a car for three years, paying for yearly MOT, fuels costs, any repairs, tax and insurance will also make a difference. Once these factors have been calculated add the cost to the mileage deprecation figure to see the actual depreciation cost. Cars are expensive to run and maintain and these yearly motoring costs will not generally add value when it comes to resale.

Selling a Car Before Depreciation Kicks in

Car depreciation is unavoidable and according to the AA the first three years of a car’s life will incur 60% depreciation. Selling a new car within the first year of its life will probably be the only way to avoid large financial losses. Many people do buy ‘nearly new’ cars due to the fact that one year old cars are still usually free from factors that increase depreciation. Sellers should not incur too great a loss if they sell within the first one to two years of buying a new car. Sell after the first few years and depreciation will become a bigger problem.

Cars That Can Reduce Depreciation

There are certain factors that can help when it comes to getting a better price when selling. Cars such as prestige models will usually sell well due to their high demand. Prestige cars do cost more to buy originally but this high ticket price will usually mean owners can still expect a good price come resale. Diesel cars are better bets than other less fuel efficient cars. Cars that are environmentally friendly should do well at resale especially with rising fuel costs.

Cars Issues That Will Increase Deprecation

There are certain issues that will make it harder to achieve an excellent price when selling a car. Cars with big engines that drink petrol are becoming less in demand due to rising fuel costs. Cars with unpopular or ‘boring’ non metallic colours are usually less in demand than those with popular colours. Mass marketed fleet cars do not usually achieve great prices simply due to the fact that there are so many of them available. Cars that are missing certain specifications such as air conditioning can also lose money for the owner.

Tips When Selling to Avoid Car Depreciation

There are certain issues to remember when selling a car in order to achieve the best price. Factors to help achieve the best price can include:

  • Fitting certain extras to a car such as alarms can increase the sale price
  • Regular car servicing can add to the vehicle value come resale time
  • A full service history can add hundreds of pounds so keep all documents safe
  • Always make sure the car is in good condition inside and out; this means professional cleaning before selling
  • Be aware of the car’s resale value by checking car pricing guides
  • Advertise the car in a number of different places including car trading magazines and internet auction sites
  • Be wary of buyers or traders who consistently try to bully the seller into a reduced price
Car depreciation is simply a fact of owning and maintaining a car. A new car can depreciate in value by thousands of pounds within the first few years, especially if high mileage is involved. Buyers should keep depreciation factors in mind when buying a new car as depreciation will make a financial difference come resale time.

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