Car Depreciation – How Much Does a Car Lose in Value?
A car will depreciate in value around 10% to 40% in its first year, and typically up to 50% or more over three years. Read our full guide from Quick Car Finance below.
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A car will depreciate in value around 10% to 40% in its first year, and typically up to 50% or more over three years.
A car will practically start to lose value as soon as it is used – and the actual difference between the price that you pay and what you sell it for is known as the depreciation.
At a glance:
- A car will depreciate 10% to 40% in its first year
- A car will depreciate 50% or more over three years based on 10,000 miles per year
- The first year can see the biggest drop, then the depreciation slows down
- Some models depreciate more than others, notably larger cars with poor fuel efficiency
Why does a car fall in value?
A car, bike or van will always fall in value because by nature, any product that is brand new is worth more to a consumer.
Equally, something new and shiny out of the box is not going to have any wear and tear and likely come with the most up-to-date technology and features – compared to something that is an older model.
In many cases, more expensive cars lose their value much slower. Larger cars are considered more expensive to run in terms of petrol and they attract repairs and fixes more regularly – hence they are likely to lose value quicker.
A smaller luxury car may be more expensive initially but consume less energy and run more efficiently – hence the depreciation is much slower.
The only exception is if you have purchased a classic car or something that is deemed more valuable with age. Certain designs or models of classic car such as Mercedes, Ferraris and Aston Martin become more sought-after with age, especially if they can be restored and are fully functioning.
There are also some iconic classic cars such as the original Mini which is considered a collector’s piece and could be used in films, exhibitions and more.
What factors make a car fall in value?
There are some factors which can make your car depreciate faster than others, including:
Age – A simple factor, the older the car, the more it loses its value (except for classic vehicles). By the time a car is 8 years old, it has pretty much done all the depreciating it can do.
Mileage – The more mileage you have done on the vehicle, the less it is worth. It means that it has been worn down more and it is more likely to need repairs further down the line. Compare this to an untouched and un-driven vehicle which should still be functioning well.
Condition – The current condition of a car is vital when looking at its value or depreciation. Something with dents, repairs or is making a funny noise is not exactly going to sell for a top dollar. Meanwhile, something that is used but still looks brand new will depreciate less.
Service history – Looking at the service history is important and how many repairs it has been through over the years. Something that has repetitive engine trouble or has continuously been in the shop might be faulty and require further work for the next buyer.
Energy efficiency – Those vehicles that are cheap to run, tend to be more desirable to a buyer. A large vehicle that guzzles petrol, is older and less efficient is going to be worth less.
Modifications – Whilst modifications such as spoilers and paint jobs might boost the value of the car initially, these additions might be very personal and less desirable to anyone buying it that is not a ‘boy racer.’
Desirability – Some vehicles are less desirable, especially if everyone in your neighbourhood has one or if the company experiences bad PR. Some brands become less favourable over time and this can be reflected in the depreciation of your car.
Length of warranty – The longer your warranty, the better, with some manufacturers offering a 3-year warranty on any major repairs, with others offering as much as 7 years.
How can I maintain the value of my car?
There are a number of ways to maintain the value of your vehicle and minimise any depreciation costs, including:
Reduce wear and tear – A car will worth less if it has scratches, dings and dents – so anything you can do to keep the car in top shape will help maintain its value. Driving carefully and avoiding off-road will help you maintain a good exterior. Inside the car, some motorists opt for using seat covers to keep the seats protected and you can avoid storing any junk or objects in your car which might affect the interiors.
Limit mileage – The less mileage you can do, the more valuable your car will be. Whilst we use our car for driving, if you plan to sell in a few years, consider other modes of transport such as train, bike or walking to mix it up a bit.
Keep a good service history – It is important to have a good track record of the car and any historical repairs that have been made. Any potential buyer will want to know its service history and getting all the stamps and certificates will be good to show when trying to make a sale – otherwise, you potentially de-value the car because the buyer has no concept of what might incur costs in the future.
Pick a popular colour and model – Selecting a popular colour like black, white or blue and a more mainstream vehicle like VW or BMW will always be popular and likely to resell at a sensible price. Driving a bright green, orange or yellow car may not be first choice for many, especially if the design or car model is unique and not particularly attractive.
Sell before the next model comes out – Some manufacturers have revolutionised their models with new product lines such as Mini, Range Rover and BMW – but your vehicle will maintain its value if you are the latest model and there aren’t any new ones out just yet.
Will leasing help me maintain the value of the car?
Yes, if you lease a vehicle or use other forms of car financing, you will only be paying your deposit and monthly interest on the vehicle and can always give it back when you no longer want to use it (settlement fees may apply).
By comparison, if you own the vehicle outright, you essentially have to find the right buyer at the right price and you will personally take the hit for any depreciation.
Fortunately, if you are looking to sell your car and purchase a new, Quick Car Finance can assist with part-exchange. This can allow you to trade in your existing vehicle and this can go towards your deposit or reducing the monthly payments for your new car. You can check your eligibility for more information, completely free of charge.
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