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How does car depreciation affect what my vehicle is worth when I sell my car?


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How does car depreciation affect what my vehicle is worth when I sell my car?

It is true that the second you drive your new car off the dealer’s forecourt it will depreciate substantially in value. In fact, according to the AA, they say by the end of the first year the vehicle will have lost around 40 per cent of its original sale price. The least you can lose off the car is perhaps 10 per cent.

That means if we took the UK’s most popular car, the Ford Focus, as an example which starts at £13,995 – this could result in the vehicle being worth just £8,397, 12 months later.

If you then do the average 10,000 miles per year, the average car will lose a total of 60 per cent of its value by the end of its third year meaning the Focus may now be worth at around £5,598 – that is obviously a big drop in value but one that is perhaps ignored when purchasing a new vehicle. But why do cars depreciate so much?

Car depreciation is the difference between the amount you have spent buying a car and what you get back when you sell your car and it is affected by mileage and its condition.

Vehicles that are more fuel efficient typically do not depreciate as quickly as ones that use a lot due to the amount of car owners that now want to cars that are cheaper to run. You would expect, therefore, that diesel cars might hold their value better than petrol cars.

If a new model has been launched since you bought your new car – or a new newer version is on the way - then this could also negatively impact what your vehicle is now worth. However if the waiting list for your new car was long then that suggests there are fewer types of this vehicle on the road which might increase the chances of your car holding its value.

Cars decrease in value less the older it gets and if the mileage is low, this will also benefit what the car is worth as it means a new owner could still get lots of use – and miles – out of your vehicle. Many car buyers might opt for an older car as it will not depreciate so much as a new car or a used car that is less than three years old although there may be more repairs and maintenance costs.

In order to get the best price when you sell your car you should keep it in a good and clean condition, keep the mileage down, keep the car regularly serviced and maintained and keep a comprehensive service history record. If you are wondering what is the case if I want to scrap my car then these things are of less importance as presumably if it is being scrapped it is of little value at all.

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