Depreciation is probably the biggest hidden cost involved in buying a car, because it doesn’t become apparent until it is time to sell. If you’re looking for a used car, there are a few things you can do to minimise depreciation, and help you get the best deal.
New cars depreciate the most in the first couple of years. After this, they start losing value at a lower rate. If you’re looking for a used car, you’re better off getting one that’s around five years old, rather than one or two years old.
The Least Depreciating Cars
The cars with the slowest rate of depreciation are either the best in their class, highly sought after or rare. A recent study has BMW’s Mini as the car which loses least value over time, because it is in such high demand. Ferrari always builds one less car than it judges the market to demand. Buy cars that run on diesel rather than petrol – escalating fuel prices means that the more economical diesel is increasingly in demand.
If you’re buying new, don’t go for a car which is just about to go out of production. As soon as they disappear from the showrooms their price will plummet. Beware of discounts – ask yourself why something has been knocked down in price, and whether this is an indication of its future depreciation.
Conversely, you can exploit these rules of depreciation to save money, especially when looking for used cars. If a car is cheap to begin with, the less you are likely to lose in depreciation. In accordance with the aforementioned five year rule, buying a nearly-new car avoids the first chunk of depreciation that occurs when a brand new car is driven off the forecourt by its first owner.
The Most Depreciating Cars
Expensive cars from manufacturers without a reputation for making luxury cars often lose the most value. There is a relatively small market for these, and once those miles start clocking up they will quickly depreciate. Large petrol-driven cars are falling out of favour as fuel prices soar and people become more eco-conscious.
For buyers of new cars, the key thing to remember is buy the best in its class. This will minimise depreciation. For those seeking a used car, exploit depreciation by looking for vehicles that are four to five years old. You may not be able to sell it on after running it for a few years yourself, but you can be more certain that you got value for money at the time of sale.
Alliance & Leicester can offer help and advice on car loans. Fish4.co.uk offers a wide range of used cars. For affordable car insurance try Co-Operative Insurance. Lastminute.com now offer a car hire service for people looking for more short-term car use.