As a motorist you have to be aware of, understand and plan for many aspects that are car-related, such as car insurance, looking after your car and many other things. You look after your car but why does it lose value? For example, a motorist bought a car a few years ago for R105 000, and now the most he can get for it is R53 000. How’s that possible? And then after talking to his friends, he realised that some car makes depreciate much faster than others. Let’s find out why a car’s value deceases over time.
WHAT IS CAR DEPRECIATION?
It describes a car losing value at a certain rate over time. Depreciation is the greatest expense that any car owner will experience. Fortunately, the rate of depreciation does decrease as the car ages.
DEPRECIATION AFFECTS THE RESALE VALUE OF YOUR CAR
The second you drive your brand-new car out of the dealership’s showroom, its value decreases by about 15 – 30%. And yet, you have only driven it for a few metres.
WHAT ARE SOME FACTORS THAT INFLUENCE A CAR’S DEPRECIATION?
Some factors determine the rate at which your car loses resale value, or the price that people are prepared to pay. The obvious thing to do is to minimise the effect these influences have, so that depreciation can be slowed down. There are two groups of factors that impact a car’s value, namely, what you do before you buy a car, and afterwards.
MAKE THE RIGHT CHOICES BEFORE BUYING A CAR
Choosing a reputable brand will ensure that the resale value will not drop as drastically as that of an unpopular brand.
EXTRA ITEMS ADDED TO THE CAR
Although many of such items as smash-and-grab protection, central locking, and air-conditioning are standard in new cars today, they are worth adding by a professional if your car is without them.
ARE YOU DILIGENT ABOUT HAVING YOUR CAR SERVICED?
Servicing your car at the prescribed intervals is important for the upkeep of your car. Neglecting to to do this regularly will affect the service book, and potential buyers will see the gaps. A complete and well-kept service book improves the value of your car. It’s much better to consistently maintain a car, and keep it clean, rather than neglecting it for years, and then trying to quickly restore it just before selling it.
What are some of the other factors that influence a car’s value?
WHAT ABOUT THE AGE OF A CAR?
Most cars depreciate in value up to 50% after three to five years. In general, cars depreciate at a rate of 15 – 20% each year.
HOW DOES MILEAGE AFFECT THE CAR VALUE?
Cars that have done over 200 000 km depreciate faster.
HOW DOES THE CAR ITSELF AFFECT DEPRECIATION?
The larger the car, the greater the depreciation, because such a car is more expensive to maintain. Your car will lose value if the outside and inside have been damaged in any way. Any damage from an accident must always be repaired professionally, to restore the car to its original condition.
Interesting how impressive electronics, such as GPS, as well as leather upholstery boosts the car’s value. Be careful of any modifications done to your car, as they may cause loss in value. White cars depreciate less than cars of other colours. A car that has had several owners sells for less.
WHAT IF A CAR BRAND IS NO LONGER SOLD IN SOUTH AFRICA?
As was the case with Citroen, when it was withdrawn from South Africa, be quick to sell such a make before its value drops too much.
SELL BEFORE THE WARRANTY AND MOTOR PLAN EXPIRE
The value of the car will drop substantially once the warranty and motor plan have expired.
We have seen how costly depreciation is to every car owner. Although you can’t control certain external factors, there are many things you can do to lessen the loss in value of your car. By choosing the right car to buy in the first place, and looking after it carefully, will minimise losses due to depreciation.
Disclaimer:
This article was prepared by Eric Sandmann in his personal capacity. The views and opinions expressed in this article are the author’s own and do not reflect the views and opinions of Prime Meridian Direct (Pty) Ltd, FSP41040. The views and opinions in the article should not be attributed to anyone but the author unless expressly stated. Nothing in this article should be relied upon as advice, this publication is presented for informational purposes only. No person should act or refrain from acting in reliance on any information found in this article, without first obtaining proper financial advice from the appropriate professional. The author makes no claims, promises or guarantees about the accuracy, or completeness, of any information linked from, referred to, or contained in this article. The author reserves the right, to edit and change the content of this article.
Also view:
Vehicle Finance, Car Insurance and Road Safety
Buying and Selling a Vehicle – Informed decisions and the Vehicle Retailer
The Online Vehicle Retail Market and Safely Selling Vehicles Online