How and Why a Car Depreciates in price
1st Jan 2015 Managing your Money
Since the new licence-plates issued in March 1 2015, so many people will be off to the forecourt to look for a new motor. But buying a brand new car won’t just be one of your most expensive purchases—it could also be one of your biggest losses.
As soon as you drive a car out of a showroom, the sell-on price drops hugely. This is called depreciation, and it can be as much as 35% in the first year and 50% after three.
You might be better off getting a nearly new or used car as you won’t lose the first big chunk. You can find a car-costs calculator at moneyadviceservice.org.uk to help you compare different prices and running costs. Whether buying new or second hand, consider the following factors that can depreciate some cars more quickly than others.
- Mileage: The more miles, the less your car is worth
- Reliability: Some cars have a poor reputation for this
- Number of owners: The fewer the better
- General condition: Damage to the bodywork, interior and exterior will reduce value
- Service history: The more complete the better
- Length of warranty: Some manufacturers now offer as long as seven years, which is a bonus when selling your car
- Desirability: The more recent the model, the better it will hold its value
- Size: Big luxury cars tend to depreciate more than smaller cars
- Fuel economy: The more miles per gallon the better for many buyers
