How depreciation affects the value of your car

How depreciation affects the value of your car

The technical definition of depreciation is "the rate at which a car loses its value over time". There are several factors that contribute to depreciation including but not limited to wear and tear, mileage, usage, and economic conditions. It is inevitable that as any car ages, its value is likely to fall. (The exception is vintage cars which hold value over time.)

The rate of depreciation is highest in the first year of ownership and continues steadily over the next three to five years. Depreciation is important to car owners because it has a direct impact on the resale value of your car.

It’s not all doom and gloom

There are several ways to lessen the effect of depreciation. The first step is to research different car models, because not all cars depreciate at the same rate. Certain manufacturers have good track records so their cars hold better value over time meaning better trade in prices for the owner. Neutral colours such as silver, black and white are popular and tend to be sought after even in second hand cars. It is also important to take care of the car itself with regular services and necessary maintenance. (FYI: MotorHappy offers Service Plans and Maintenance Plans, as well as Extended Warranties, that help you budget for these inevitable car-ownership expenses. Click here for a quick online quote.)

Cars with great fuel economy will always be more in demand. Low mileage is another key factor in determining depreciation.

Dealership or private sale?

When it comes to selling your car, you will have to make a decision to trade it in with a dealership or sell it privately. Traditionally trade ins have a lower value as the dealership still has to make a profit with their own mark up, however usually this process is more convenient. Depending on the exact model most private sales will offer a better price for the seller if you are willing to do a certain amount of the legwork yourself.

The bottom line is that car depreciation is inevitable, but you can minimise the effects of depreciation and ultimately have a positive influence on the value of the car.

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