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How Might Car Depreciation Affect You

Last Updated: 1st May 2018
How Might Car Depreciation Affect You

23rd November 2016

If you own a car, then depreciation will hit you one way or another. It could happen ever so slightly or it could hit you hard. Almost every car loses value as soon as you drive it out of the showroom. Depreciation is simply the difference between the amount you buy a car for and the amount you get back when you sell or trade it in.

This is the main downfall when it comes to owning your car yourself through buying it outright or through car finance. If you wish to avoid falling into the trap of car depreciation, it might be well worth considering getting a car through cheap car leasing.

How the price is affected

When it comes to car depreciation, residual car values are expressed as a percentage of the original price. This can make the depreciation seem better than it actually is. For example, the difference may seem small in percentage terms when it comes to small and large cars. However, when you look passed the percentage and go for the cold hard cash value, you see the damage depreciation can do.

To put it in perspective, 50% depreciation between a city car and a saloon doesn’t sound too bad, until you look at the cash price. A city car worth £8000 brand new will drop to £4000, whilst a luxury saloon can be £40000 brand-new and after depreciation it comes out at £20000. Depreciation can be horrible when it comes to the cash price.

Running costs also affect depreciation. If your car isn’t very fuel efficient, the depreciation will be worse and your car will be valued less. The better the fuel economy, the more value your car will be worth.

How to reduce the effects of depreciation

You can counter the effects of depreciation before you buy a car. You do this by purchasing a car that is very in-demand and has low running costs. The majority of city cars and superminis fit that description.

However, if those cars don’t suit your needs, you need to find other ways of reducing the effects of depreciation. Keep a comprehensive record of service checks and MOT certificates because you can prove that as the owner, you have chosen to keep your car in shape. Also try and keep your mileage as low as possible. The more miles you do, the less the car will be worth.

Cars that don’t depreciate much

These following cars keep their value.

Tesla Model S

The Tesla Model S retains 60.1% of its value after three years and 36,000 miles. That is very impressive.

Dacia Duster

The Dacia Duster 1.6 SCe Ambiance model came in at 56.39% after three years and 36,000 miles driven.

Porsche Mecan

Porsche Mecan 2.0 T SS PDK model retained 56.32% of its value after three years and 36,000 miles driven. But again, this is a car that isn’t exactly affordable in the beginning, so the cash difference between a Mecan depreciating and a Dacia Duster will be significant.

There are many other cars that retain their value and other cars that lose them. If you are interested in a car that may depreciate badly, then why not consider getting it another way rather than full ownership. Through car leasing, you can drive and run the car, but when the contract ends, you can simply hand the car back and not have to worry about depreciation at all. Whatever car you are interested in, we have some of the best car lease deals on the market.

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