Depreciation and Resale Value
Understanding Depreciation
Like everything else, cars lose their value over time. It is unavoidable, regardless of make, model, or condition. But how much do cars depreciate per year? New vehicles in the UK typically depreciate fastest in the first year, with estimates ranging from 15-35%. This means your brand-new car could be worth thousands less simply by driving it out of the dealership! The depreciation then slows after the first year but continues to eat away at the value, with some cars losing up to 50% or more after three years. There are a couple of factors that affect the rate of depreciation and resale value:
- Mileage: Higher mileage generally indicates more wear and tear, which can lower its resale value.
- Age: Older cars are generally worth less than newer models. Newer cars often have the latest technology, safety features, and warranties.
- Condition: A well-maintained car with a clean history will typically retain its value better than a car that has been neglected or involved in an accident.
- Market Demand: The popularity of a particular car model can also influence its depreciation rate.
- Economic Factors: Economic conditions like inflation and interest rates can also affect car depreciation.
How Depreciation Impacts Car Resale Value?
The speed at which it depreciates directly affects the car’s resale value. If you buy a car for £20,000 and it loses 20% of its value in the time you have it, when you come to sell it, it would be worth £16,000. The extent of depreciation depends on the factors mentioned above.
Brand-new cars will lose value much faster in the first year or two, and then the depreciation slows.
Electric Car Depreciation
With the rise in electric car popularity, you may wonder if it is worth making the switch. Electric cars will depreciate due to factors similar to those of petrol or diesel models. Still, they have some added extras due to their design, such as the battery’s condition and whether it is a hybrid, self-charging or fully electric.
While electric car depreciation is still something to consider, they have been performing pretty well compared to standard combustion cars in recent years, holding their value well, thanks to the high demand and the growing ULEZ zones within cities.
So, do electric cars have a good resale value? Yes, at the moment, they tend to hold their value relatively well, but like any other car, they will still suffer from depreciation.
Tips for Minimising Depreciation
- Proper Maintenance: Regular maintenance will help preserve your car’s value. Keep up with oil changes, tyre rotations, and other recommended services.
- Avoid Excessive Mileage: Excessive mileage can accelerate depreciation. Try to limit your driving if possible.
- Consider a Car Warranty: A warranty can protect your car from unexpected repairs and help maintain its value.
- Choose a Reliable Make and Model: Opt for a make and model known for its reliability and durability.
- Negotiate a Good Price: When buying a car, try to negotiate a lower purchase price.
By understanding how car depreciation works and taking steps to minimise its impact, you can make more informed decisions about buying and selling vehicles.
How Much do Cars Depreciate Per Year?
As soon as you drive off the forecourt, your new car loses value. If it is brand-new, its value will drop fastest in the first year, losing up to 40% of its original price before depreciation slows. By the end of three years, averaging 10,000 miles annually, your car could have lost up to 60%.
Do Electric Cars Have a Good Resale Value?
Broadly speaking, yes. Electric cars hold their value pretty well, but the brand name does affect depreciation. Brands such as BMW, Tesla, Mercedes etc will hold their value better than other mass-market options.
