Your Cars Losing Money, But How Much?
There Are A Number Of Factors To Consider When It Comes To The Cost Of Running Your Car - Such As Fuel, Tax, Insurance and the big worry of Depreciation.
Sep 08, 2014
What are the biggest costs when you buy a new car? Insurance? A warranty? Servicing? Or the cost of fuel?
In many cases, the answer to this question is ‘none of them’. For millions of drivers, depreciation is the biggest factor that affects the running cost of a new car. Simply, depreciation is the difference between the amount you spend for a car and the amount you get back when you sell it.
The AA says that ‘for many, depreciation is the single biggest factor affecting running costs adding more to cost per mile than fuel.’ In our guide, we look at the factors that make your car depreciate in value and what you can do to help. We also list five of the worst cars you can buy if you want to retain a good resale value.
Factors that make your car depreciate in value
Most new cars depreciate in value between the time you buy them and the time you sell them. The drop in value varies between makes and models, but typically is between 15 and 35 per cent in the first year and up to 50 per cent or more over three years.
The most common factors that contribute to your car’s depreciation are:
- Age - A new car loses value as soon as you drive off the forecourt and by the end of the first year will have lost around 30 to 40 per cent of its value. If you do 10,000 miles a year, the average car will have lost around 60 per cent of its value by the end of its third year
- Fuel efficiency - Cars that are more fuel efficient tend to depreciate more slowly because of an increased second hand demand for cars that are cheaper to run
- Make and model – If you buy a brand new make or model it may hold its value better than a car which has subsequently been replaced by a redesigned or brand new model
- Mileage – The more miles you do, the less your car will be worth in the future
- Reliability – Some cars have a reputation for unreliability and this can affect their second hand value
- Condition – Damage to the interior or exterior will reduce the value
- Service history – Cars with a full service history tend to retain their values better. You can evidence this by getting your service book stamped
- Size - Large luxury cars tend to depreciate more than smaller cars because they cost more to run and because it costs more to repair and maintain them
What you can do to maintain the value of your car
While a lot of the above factors may be out of your control, there are a number of things that you can do in order to maximise the second hand value of your car. These include:
- Keeping the car in a good clean condition – repair any damage as soon as possible
- Driving as few miles as possible – the lower the mileage the higher the residual value of your car
- Having your car regularly serviced – having your car serviced in line with the manufacturer’s recommended intervals can help
- Selling your car before a replacement model is launched – an older ‘out of date’ model is likely to fetch less
- Choose a popular colour – odd or unusual colours tend to be worth less than popular colours
5 cars that depreciate quickly that you should avoid
At the end of 2013, MSN Cars undertook some research to find the worst depreciating cars on Britain’s roads. If you’re looking to avoid huge depreciation costs, here are five of their top 20 cars that you should avoid.
1. Renault Espace
The Renault Espace was the second worst performing car in terms of retaining its value. The Espace retained just 12 per cent of its value after three years with an average depreciation of £22,182.
2. Chevrolet Lacetti Estate
Many of Chevrolet’s models appear on the ‘worst depreciation’ list but the Lacetti Estate performed worse than the hatchback. It retained just 15.3 per cent of its value after three years.
3. Citroen C-Zero
According to MSN, in cash terms the Citroen C-Zero suffers from the worst average depreciation of any car in the list. Its average depreciation over three years was an eye-watering £27,875.
4. Peugeot 807
MSN says that ‘big French cars suffer from notoriously steep depreciation’. The Peugeot 807 loses £18,225 after three years and 60,000 miles and retains just 16.5 per cent of its new value.
5. Vauxhall Astra Hatchback
The Vauxhall Astra is one of the most popular cars on Britain’s roads but the hatchback model retains less than a fifth of its value over three years. The average depreciation was £15,267.