How to beat depreciation
Planning ahead when buying a new car could save you thousands when the time comes to sell your car.
When most of us start shopping for a new car, its future resale value is one of the last things we’re likely to think about. While fuel consumption, handling, safety ratings and aesthetic appeal dominate our thoughts as we wander showroom floors, planning ahead to consider how much your car will depreciate in the future is usually glossed over or forgotten.
It’s a widely known fact that cars drop in value as soon as they’re driven off the showroom floor, but just how far prices can plummet in a short amount of time comes as a surprise to many.
When you’re calculating how much a car will cost to own and run, factors like servicing and rego costs, insurance, fuel consumption and maintenance expenses all need to be taken into
account. But perhaps the biggest cost you’ll have to cope with across the course of your new car’s life is depreciation, which refers to the value your car loses over time while you drive it and own it.
Statistics from Manheim show that, on average, new vehicles lose 30 per cent of their value as soon as you drive them home. After five years – so, if you bought your new car in 2010 – it would only be worth 39 per cent of the original purchase price.
However, the numbers vary depending on the size, make and model of car you buy. While small cars purchased in 2010 are, on average, worth 39 per cent of their original value today, large cars only fetch 27 per cent of their original purchase price. Large SUVs, on the other hand, retain 51 per cent of their original value.
But as information spreads about the average resale values of different makes and models, new car buyers have the power they need to beat the problem of depreciation. Although it may seem a little odd to base your car buying decision on how much you might be able to sell your new set of wheels for in three or five years’ time, considering this factor now could save you a whole lot of money in the future.
If you choose a car that holds its value well you can greatly reduce the cost of owning a car, plus leave yourself in a much better financial position when the time comes to buy another new car.
Best and worst makes and models
So, how do you know if the car you want to buy will still fetch a decent price down the track?
The first step is to look at the most popular car choices with Australian buyers. Research has shown that Aussie drivers are more likely to buy silver, grey, white and black cars rather than anything brightly coloured, while automatic transmissions far outsell manual cars.
Certain makes and models also hold their value much better than others. For example, a manufacturer with a firmly established reputation for reliability, such as Toyota, will attract higher resale values than a relatively new entry to the Australian market like Great Wall Motors.
If you’re in the market for a small car, past figures from automotive data providers RedBook.com.au and Glass’s Guide have shown that vehicles like the Toyota Yaris, Honda Jazz, Mazda2 and the Volkswagen Polo typically hold their value well.
Mazda6, Honda Accord and Volkswagen Passat are strong performers in the family car class, while the Toyota Kluger, Mazda CX9 and Volkswagen Touareg are some of the better SUVs. As for the worst cars when it comes to resale value, 2011 figures from Glass’s Guide published by Fairfax revealed the Ford Falcon XT sedan as the mainstream car that held the least value, retaining just 39 per cent of its original price after five years. The Falcon G6 sedan, Holden Commodore Omega 3.0L 6 wagon, Nissan Maxima 350ST-S and Hyundai i45 Active sedan rounded out the top five.
If you want to get an idea what your new car will be worth tomorrow, RedBook.com.au offers a “Future Valuation” service via its website. Designed to help you make an informed decision when purchasing, this valuation takes into account factors like how many kilometres you travel and how long you plan on owning the car. Of course, you’ll have to pay for the service, with a single valuation priced at $24.95.
How to hold value
Buying your car at the end of the calendar year from a dealer looking to offload old stock can help you get a better deal, meaning the car’s drop in value during your first few years of ownership won’t be so noticeable.
Once you’ve taken your car home, drive it like you own it — not like you stole it. Keep the interior and exterior in good condition, and garage it if possible to prevent wear and tear.
It goes without saying that regular servicing is also a must. Of course, you’ll need to keep records of your car’s service history for all those trips to the mechanic to be worth it.
Finally, repairing any minor damage to your car is another top tip, as even the smallest of scratches or dents can make a huge impression on an interested buyer.
With a little bit of forethought and an eye to the future, you can strike a blow against depreciation and get a much higher resale price for your car. Then when you go shopping for your next set of wheels, you’ll have a whole lot more bargaining power burning a hole in your hip pocket.