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Car Depreciation Explained

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Economy

Car Depreciation Explained

Cars start to lose their value as soon as you drive them off the forecourt. In spite of this, many people do not factor in the cost of depreciation when they buy a new car. In this guide we’ll discuss what car depreciation is and how it works.

What is Car Depreciation?

Car deprecation is actually relatively simple to understand. Essentially, it’s the difference in price between what you paid for your car and what your car is worth when you come to sell it. By the end of their first year, it is estimated that new cars have already lost around 40% of their value. By the time that the car is three years old, this figure will likely rise to around 60%. This shows that, as the car gets older, the depreciation rate slows down.

What Factors Impact on Depreciation?

A wide number of factors influence how much your car will depreciate in value and how quickly it will do so. However, the primary factor is the age of the vehicle in question. Although new cars depreciate in value quickly, used cars tend to hold their value a little better. You should also note that depreciation varies across manufacturers and models. Added to this, a range of other factors also make a difference, such as:

  • The popularity of the car
  • Its perceived efficiency
  • The reliability of the car
  • Whether the car has been well maintained
  • The mileage of the car
  • Whether or not it has a full service history

There are steps you can take to ensure that your car holds as much value as possible. To guard against depreciation, you should ensure that your car is serviced regularly, is well maintained, and mileage is kept as low as possible.

What Should I Do with My Depreciated Car?

Car depreciation happens to every make and model of car, so it’s not something you should be overly concerned about. However, you should be aware of it to ensure you’re selling your car at a financially viable time (this may be limited by any hire purchase agreements you may have).

As we mentioned above, new cars witness the highest depreciation, so if you’re concerned about this, then you may be better off opting for a used car. Many reputable dealerships, such as Fords of Winsford, will offer nearly new cars, meaning you can buy a used car that’s practically new, but where someone else has absorbed much of the depreciation cost. Alternatively, you can buy a vehicle that’s already several years old, knowing that depreciation will be less if you’re thinking of holding it for a period of several years.

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