Bought a car? How to minimise depreciation

Depreciation can drastically cut the value of your car, warns Tim Pickering. Here’s how you can fight it.

Choosing your next car is always a big decision.

There are endless questions to consider, ranging from what model to choose, petrol or diesel, hybrid or electric, manual or automatic.

There’s also the question of new or used.

When figuring out which car you want to buy next, you’ll obviously need to consider your purchasing options.

Are you able to purchase the car outright, or will you need to take the financing route?

You’ll also need to consider the running costs of the car, as well as the tax and insurance costs that will come with the vehicle.

Some cars can be insured for less than you'd think.

But while just about everyone analyses the cost of their next car, it’s typically only after the fact that they consider the value of the car, and how long you can maintain that value.

The sad truth is, no matter how many bells and whistles your car has when you buy it, it’s still going to drastically drop in value.

According to The AA, the average new car will drop in value by 40% in the first year, and will only retain 40% of its original value after three years – meaning it will drop in value by a whopping 60% overall.

To put this into perspective, let’s assume you spent £25,000 on your brand-new car three years ago; depreciation means that it is now only worth £10,000.

It’s important to remember that if you buy a car from new and intend to keep it for its entire lifespan, you should not allow the threat of depreciation to put you off.

However, if you intend to sell the car after a few years, it’s something to bear in mind.

Buying a used car is a different matter. Even if it's a nearly-new car you're after, it will have dropped significantly in value.

This means that if you decide to sell it further down the line, you won’t be making as much of a loss as you would with a brand-new car.

If you’re concerned about reliability, check this list of the cars that are most and least likely to need repairs and how much these could cost.

The Money Advice Service can give you an estimate of a used car's running costs per year, providing the car is less than five years old.

How to maintain the value of your car

Regardless of which car you buy, depreciation will always be a concern. Thankfully, there are a number of ways you can help prevent the value of your car dropping too drastically, whether it’s a new or nearly new car.

We'll start with perhaps the most obvious, and that is keeping your mileage to a minimum.

High mileage is one of the most powerful factors that can work against the value of your car, and it’s one of the things that's most likely to scare potential buyers away if you decide to sell it in the future.

This doesn’t mean you shouldn’t drive your car but use your judgement – if you can find a cheap ticket and aren't pressed for time, why not use the train for big day trips?

Regular care and maintenance should go without saying, but you’ll need to remember that this won’t improve the value of your car.

It will, however, help prevent the value from dropping substantially, and proof that the car has been regularly serviced and maintained will instil faith in future buyers.

Someone who is interested in purchasing your car may use a lack of service history as an excuse to haggle down the price.

If you’re planning to trade in your car in a part exchange detail, make sure you read this handy guide first.

It’s also incredibly important that you shop around and do your research when purchasing your next car to ensure you choose one that is less likely to depreciate at an aggressive rate.

Cars from some manufacturers retain their value better than others, and it’s not always the luxury brands as you might expect.

Finally, you should also think carefully before making any modifications to your car.

While options like reverse sensors and Bluetooth will probably appeal to most future buyers, over personalisation should be avoided.

Upgrading features like stereo systems, trim, interior, over the top alloys or stereo are unlikely to be seen as a positive by potential buyers, and you definitely won’t see a return on investment when you sell the car.

Tim Pickering is operations director of GO Vauxhall.

The views expressed in this article do not necessarily represent those of loveMONEY.

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