Updated: Demystifying Depreciation and Its Impact on Your Car's Value

Whether you’re a car enthusiast or just looking to make wise financial choices, understanding the concept of car depreciation is essential. In this blog, we explore the idea of car depreciation, and we uncover the reasons why your beloved car probably doesn’t hold the value it once did. 

The technical definition of depreciation is "the rate at which a car loses its value over time". Several factors 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.

• 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.

When it comes to selling your car, you will have to decide whether 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 markup, 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.