There are only a handful of cars that won’t lose value over time, and let’s face it, most of us aren’t lucky enough to be driving a 1962 Ferrari 250 GTO. The reality for everyday car owners is that depreciation is the highest cost when buying a new car. That’s right, no matter how well you take care of it, the simple act of owning your car eats into its resale value, so much so that it costs more than fuel, insurance, servicing and running expenses.
So how do you get the best value for your car? We’re glad you asked. Car depreciation varies depending on car make and model and isn’t always linked to the quality of the car, but there are some general rules that can help you make an informed decision when buying and selling your car.
Size does matter
When it comes to selling your car the larger the car, the more value it will lose over time. This is partly because large cars cost more to buy in the beginning. Here’s how car size impacts depreciation based on RACQ’s 2016 Private Vehicle Expenses Report.
* Based on data from RACQ’s 2016 Private Vehicle Expenses Report
It’s all a matter of time
Newer cars lose value A LOT quicker than old cars, it’s an old cliché that definitely rings true ‘a new car loses value the moment you drive it off the lot.’ To see the way time impacts the rate of depreciation we’ve plotted the way your car value changes in the first 5 years of ownership based on research from trusted choice.
^Average price of a medium car according to RACQ’s 2016 Private Vehicle Expenses Report.
* Depreciation rates based on 2014 study by Trusted Choice Insurance.
How do you get the best value for your car?
You can take your dollar further by keeping a couple of things in mind when buying and selling your car.
Buy used cars
From an owner’s perspective, losing 25% in the first year is significant, but for buyers it is a perfect opportunity to get a car that feels new, is under warranty but without the new car price tag.
Time your sell
Depending on your requirements for your car there are a number of times that are better to sell than others. They are:
Early in the first year:
If you know you’re looking to upgrade or need to sell your car not long after buying it time is off the essence. You may still lose 11% but it’s a lot better than the 25% you are likely to lose at the end of year one.
At three years:
After losing a large percentage of value after the first year, your car will only lose roughly 10% a year for the next few years. At three years old your car should still be worth more than half what you initially paid. If you’re looking to update and upgrade that is enough to make a reasonable contribution to the purchase of your next car.
If you’re looking to sell your car don’t waste time as your car drops in value. Get a free estimate today and get cash for your car…fast!