Buying a new car can be an exhilarating experience. There’s no feeling quite like driving a brand new car and seeing the miles turn from ‘0’ to ‘1’ during your first excursion. Plus, there are a ton of great benefits that often come with buying a new car, from 0% APR finance arrangements to 3 years without MOT costs (and the occasional ‘free’ extras thrown in by showroom salespeople).
That said, there is something to be said for buying used cars too, especially when it comes to the economic value when compared to the depreciation rates of new vehicles.
It’s a given that cars lose value the older they get, as generally speaking, the more miles and years a car racks up, the more likely it is to encounter functionality issues, collect superficial damage and suffer general wear and tear.
While a car’s value can be somewhat maintained by taking good care of the vehicle (see our guide to maintaining the value of your car here), a car will inevitably decrease in value over time. This is true of brand new cars (which almost always lose value the moment you drive them out of the showroom) and also used cars, which are already a few years (or more) old.
For many cars, the rate of depreciation can often be higher in the first three years of ownership. In some cases, a car can lose as much as 50% of its value after three years, assuming it travels at an average rate of 10,000 miles per year. This can differ between manufacturers and models, and excludes additional considerations such as condition and excessive mileage. However, we do have a handy example data sample below that outlines roughly how much your car could be worth after a few years of ownership.
|Sector||1 Year||2 Year||3 Year||4 Year||5 Year||6 Year||7 Year||8 Year||9 Year||10 Year||+10 Year||Average Price|
As you can see above, different classifications of vehicle depreciate at different rates, some of which depreciate as much as 50% after three years of ownership, while others can lose value at a rate closer to 10% of their original sale price each year.
While these rates of depreciation are based on age alone, there are a number of additional factors that could also affect a car’s value during the first three years of ownership. Here are a few additional things to bear in mind if you’re looking to retain as much value as possible:
It stands to reason that the more miles a car has travelled, the more likely it is to incur general wear and tear, and therefore be worth less at resale. According to a 2017 study by the Department for Transport, the average annual mileage travelled per person in the UK is 7,800. Cars that have travelled over the average per year will likely be worth a bit less at resale, while vehicles that have travelled under the average will likely be worth a bit more.
The number of previous owners a vehicle has had can also affect its resale value, even in as short a time as three years, should the car change hands during that period. This is worth bearing in mind when shopping for a used car with the intention of purchasing. Even if the car is only a few years old, if it has changed hands a number of times during those years, it is likely worth less than an identical car with only one previous owner.
It’s fair to say that when purchasing a used car, it’s reassuring to know as much about the vehicle’s history as possible; it gives you more confidence that the car won’t have any undetected or underlying issues and shows that the car has been serviced regularly and on time.
Oppositely, a car with only partial or no service history will likely be worth less than an identical car with a full service history. This is simply because it adds an element of ‘risk’ to the buyer, and also means that the resale value of the car will drop for them too.
Maintaining the condition of your vehicle is vital should you wish to hold on to as much value as possible for when you come to sell the car. This could include everything from having an annual manufacturer service, such as an AUDI specialist car service for owners of Audi vehicles. Also, simply driving the car with due care and attention to avoid any scuffs and scratches to the paintwork, or chips and dents in the alloys.
Furthermore, maintaining the condition of the car’s engine and general functionality is crucial, should you wish to get a good price when you come to resell. Having necessary repairs as issues arise, such as replacing worn brake pads and tyres, keeping the car regularly topped-up with oil, antifreeze and coolant and having any odd sounds or shudders emitting from the vehicle inspected by an expert, are all great examples of how to take good care of your car.