If you are thinking of buying or selling a car, you might have heard of the term “car depreciation”. But what does it mean and how does it affect you? In this blog post, we will explain what car depreciation is, how it works, and what you can do to minimise it. 

What is car depreciation? 

Car depreciation is the difference between what you paid for a car and what it is worth now. It is the rate at which your car loses value over time. For example, if you bought a car for £20,000 and sold it five years later for £10,000, your car has depreciated by 50%. 

Car depreciation is inevitable and unavoidable. As soon as you drive a new car off the dealer’s lot, it becomes a used car and loses some of its value. As your car gets older, it accumulates more miles, wear and tear, and possible faults, which further reduce its value. 

How fast does a car depreciate? 

The speed and amount of car depreciation depend on various factors, such as: 

The make and model of the car. Some cars are more popular and reliable than others, and therefore retain their value better. 

The age and mileage of the car. The older and more used a car is, the less it is worth. A car typically loses around 15-20% of its value in the first year, and around 10% in each subsequent year. After five years, a car may have lost 40-60% of its original value. After 10 years, it may have lost 80% or more. 

The condition and history of the car. A car that is well-maintained and has a clean service and MOT record will be worth more than a car that is damaged or has a sketchy history. A car that has been involved in an accident or has been written off will have a lower value than a car that has a clear history. 

The fuel type and emissions of the car. A car that is more fuel-efficient and eco-friendly will have a higher value than a car that is more costly and polluting to run. For example, a hybrid or electric car will depreciate slower than a petrol or diesel car, especially in light of the changing environmental policies and consumer preferences. 

The colour and features of the car. A car that has a neutral and appealing colour and has desirable features and options will have a higher value than a car that has a quirky or unpopular colour and has basic or outdated features. For example, a black or silver car with leather seats and a sunroof will depreciate slower than a pink or yellow car with cloth seats and no air conditioning. 

How to minimise car depreciation? 

While you cannot stop car depreciation, you can take some steps to slow it down and save money in the long run. Here are some tips to help you reduce car depreciation: 

Choose a car that has a high residual value. Do some research and compare different cars and their depreciation rates before you buy. Look for cars that are in high demand, have a good reputation, and have low running costs. Avoid cars that are rare, have a bad reputation, or have high running costs. 

Consider buying a used car instead of a new car. A new car loses a lot of its value in the first year, so you can save money by buying a car that is one or two years old and has already gone through the initial depreciation. You can also look for nearly new or pre-registered cars that have low mileage and are still under warranty. 

Keep your car in good condition. Regularly service and maintain your car and fix any issues as soon as they arise. Keep your car clean and tidy and protect it from the elements. Avoid modifying or customising your car, as this may lower its value or make it harder to sell. 

Keep your mileage low. The more miles you drive, the more your car depreciates. Try to limit your driving and use alternative modes of transportation when possible. If you do need to drive a lot, consider leasing a car instead of buying one, as this way you don’t have to worry about depreciation. 

Sell your car at the right time. Timing is everything when it comes to selling your car. You want to sell your car before it reaches a major milestone, such as a new registration plate, a big service, or a MOT test. You also want to sell your car when the demand is high and the supply is low, such as in spring or summer, or before a new model is released. 

Car depreciation is a fact of life that every car owner must deal with. However, by understanding how it works and what factors affect it, you can make smart choices and minimise its impact on your finances. Remember, a car is not an investment, but a means of transportation. The best way to save money on car depreciation is to buy a car that suits your needs and budget, and take good care of it.