How much does a car depreciate every year?
1 April 2023
By Joy Pearson
As a car owner, one of the things you may be wondering is how much your vehicle will depreciate each year. When you get a vehicle on finance, you want to make sure, that when your finance is up, the car still holds value. This makes it easier to sell or trade-in, or can help you pay off the remaining balance of the loan, if need be. Depreciation is the decrease in value of your car over time, and it's a natural part of car ownership. In today's post, I'll try to answer this common question and what factors can affect a vehicle's rate of depreciation.
The rate of depreciation of a car depends on several factors such as the brand, model, age, mileage, and condition of the vehicle. Generally, new cars can lose up to 20% of their value in the first year of ownership, and up to 60% in the first 5 years.
Age and mileage are two of the most significant factors that can affect a car's rate of depreciation. The older a car is and the more miles it has been driven, the more it will depreciate. A car that is well-maintained, with low mileage, will hold it's value better than one that has been driven extensively.
The condition of a car is also a significant factor in a car's rare of depreciation. A car that has been well-maintained, with no major accidents or damage, will retain its value better than one that has been in an accident or has significant wear and tear. Same goes for when the demand for a particular make or model varies from one region to another. If there is a high demand for a particular type of car in your local market, it may hold its value better than other cars. Conversely, if there is a low demand for a car in your area, it may depreciate more quickly.
Let's say you own a car that is no longer being produced, and needed to get one of the parts fixed. As that car is no longer being produced, it can become more difficult and expensive to find replacements parts. This can impact the value of the car because potential buyers may be hesitant to purchase a car that may be difficult to maintain or repair.
Another factor to consider is changes in technology. As new technology is developed, older cars may become less desirable or outdated. For example, cars that are not equipped with features such as bluetooth connectivity or backup cameras may be less desirable than new models that have these features. This would mean that the reputation and reliability of a car can also affect its value. Cars that are known for their reliability and safety can hold their value better than cars that have a reputation for being unreliable or unsafe.
Taking into account all these factors, a car's rate of depreciation depends of numerous factors, therefore it is difficult to provide a definitive answer to the question. However, understanding these factors can help you make an informed decision when purchasing a car, and it can also help you determine how much your car may be worth in the future.