It’s a well-known fact that all cars depreciate to some degree. In case you weren’t aware, depreciation refers to the gradual decline of a car’s value over time.
There are many factors that can affect how much or little a car depreciates, so if you are considering buying a used car it is important that you choose wisely, because you could otherwise end up with a car that is worth very little in the near future!
Photo credit: bristol lad (obtained via Flickr).
This handy guide to used car depreciation will show you how you can make this happen.
Resist the temptation to buy a brand new car
You might go down to your local car dealership to look at one specific used car and then consider buying a brand new one instead, but I urge you to resist such temptations! Sure, there are some benefits to buying a new car over a used one, but value isn’t one of them!
The problem is all cars depreciate the most within the first three years of their lives, and some models depreciate quite badly over others in this respect. For example, the Renault Fluence Z.E. electric car is only worth a shocking 33% of its new value after 12 months!
Of course, not all cars lose value quite as badly as that particular model, but depreciation is still a big problem with brand new cars. If you honestly feel the need to have a “new” car, I would recommend getting a pre-registered or nearly-new model (i.e. 12 months old or less) from dealers such as the Pentagon Group.
Even though this isn’t better than buying a brand new car, it’s certainly no worse than doing so!
Going back to used cars, I’ve briefly mentioned at the beginning of this blog post the importance of choosing your next used car wisely, but I will elaborate more on this point for you.
Firstly, used cars that have specific options such as automatic transmissions or diesel engines tend to be more valuable than manuals or cars with petrol engines. This is because optional extras on brand new cars cost extra, and so this extra value is reflected in used car prices.
Secondly, there are other factors that can influence the prices of used cars:
Mileage – cars with lower-than average mileage tend to be more valuable;
Condition – cars in pristine showroom condition are more desirable than ones with scratches, dents and scrapes in the bodywork;
Former keepers – a car that has 12 previous owners isn’t going to be as popular as one that has been owned by one person from new;
Service history – you should make sure that the car you buy has a full and comprehensive service history, preferably from a main dealer. You should also maintain that service history for higher-than average future value.
Lastly, the type of car you buy can also have an influencing factor on its future value. Smaller cars with highly-efficient engines tend to be more valuable in later years than large SUVs with V8 engines, for example.