Car Depreciation, one of car ownerships biggest and often underestimated costs. Defined as the difference in car value at the point in purchase vs the time you want to sell, depreciation can have a huge impact on the resale value of your car. Depreciation levels can differ substantially depending on the type of car, year, make and model; and of course market demand at the time of intended sale. Although most individuals are aware that car depreciation exists, most do not fully understand how substantial the cost can be for them in the long run.
If you have recently purchased a new car, it would be safe to say you won’t bet thinking of selling any time soon – why would you? Buying a car with the intent to sell under a year, or even two can definitely have a negative impact on your finances. From the time you purchase your new or used car, it begins to depreciate. Selling your car too soon after purchase decreases the level of value you will get from owning that same car across a longer 4-5 year period. However at some point, you will almost certainly decide to resell or upgrade your car, and when doing so you will need to understand the resale value. The resale value is the expected price the car will get after a few years of ownership. A higher resale value is ideal and indicates that the car has many desirable qualities such as reliability, practicability, fuel efficiency and safety.
Different Depreciation Types
- New Car Depreciation
New Cars depreciate the fastest. Most cars will lose 10% of their value as soon as the car is driven out of the dealership, and lose another 10 – 20% within the first year. After the first year, cars decrease in value by about 15 – 25% per year, with an average of 60% depreciation in value by the end of 5th year. Therefore, if you’re planning to sell your car within the first 5 years of buying it, you’ll most likely lose a significant amount of the car’s initial value compared to its resale value.
- Used Car Depreciation
Due to the large percentage of depreciation in the first year, it can actually save you around 20 – 30% of the car’s value if you purchase the car in its second year of life. If you’re open to purchasing even older cars, you could save more and have a higher resale value in comparison to its initial purchase value by avoiding the first few years of owning the car.
How to avoid the cost of depreciation
Depreciation is an immense cost on top of insurance, registration and maintenance cost, so why not use a car subscription service like Carly? Depreciation is the largest cost a car owner has to deal with.
With Carly, you don’t have to think about any of the extra costs, while having a large range of new and used models to choose from. Just pay a monthly cost depending on the type of car you’re subscribing to, and we’ll take care of the rest. Insurance, maintenance and registration costs, we’ve got it covered. You get to drive the car you want, for as long as you want, whilst knowing you’re not throwing money away due to depreciation. Get searching for your latest car today.