For a newly bought car, depreciation is one of the highest costs that car owners incur. The second the key is turned in the ignition, the freshly bought car loses 20% of its value. Albeit inevitable, there are multiple ways in which this progression can be slowed – from purchasing a vehicle that consistently maintains its value to keeping tabs on maintenance.
Lower your depreciation before you buy
The second you buy your car, the value comes down before you are even off the driveway. Thankfully, there are ways to reduce the blow to the value of your vehicle:
Choosing the right build and model
Some of the indicators that a future car owner can look for in prospective models are – excellent fuel economy, a reliable reputation, and low running and maintaining costs. Your best bet will be to pick for a model that retains its value in the best way possible. Manufacturers that have been recognised by companies such as J.D. Power usually mean that they bring out vehicles with stellar quality, which, in turn, means a lower depreciation rate. Certification from National Highway Traffic Safety Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS) can ensure the safety of your vehicle.
Keeping the above checklist in mind while shopping for a car helps you to recover some of the costs lost to depreciation during resale.
Gathering knowledge of the market
It can be confusing to gauge the resale value, three to five years down the road. Some of the confusion can be alleviated if proper research is done before buying the car. Websites such as AutoTrader and Cars.co.za help you estimate future prices of different cars. Every year, Kelley Blue Book publishes a list that gives information on the top list of cars with the best resale value. Websites like these can be immensely helpful in narrowing down your search for an asset that depreciates at a slower rate.
Pick a common colour
Picking the colour affects the resale value of a car in more ways than you can think. Colours such as white, gold, silver, grey, black, etc. remain in constant demand and are better at maintaining value. On the flip side, it will be harder to find buyers for a car that’s been painted neon or a rare color.
Consider options other than buying
Evaluation of all the options available in the market also helps you in conducting a cost-benefit analysis. Leasing can be one option to lower depreciation if the buyout price of the car at the end of the lease is lower than the resale value.
Another option is to buy a second-hand car; the majority of depreciation is absorbed by the first owner, and the loss in value is reduced considerably.
If you’re considering vehicle finance to purchase a car, be sure to check out our comparison table to see who offers the lowest rates and best features.
New cars come with a warranty and finding a manufacturer that allows the transfer of the warranty to the next owner of your car – can help maintain the car’s value .
Ways to reduce your depreciation after you buy
Want to maintain your car in the best shape? Keep reading for some tricks that prolong the life of your vehicle and also help in lowering your depreciation:
A well-maintained car will inevitably have a higher resale value compared to a neglected one. Heed your dealer’s advice and bring in your vehicle at scheduled intervals for servicing and regular upkeep. Another important tip is to keep records! Documentary evidence makes you a responsible car owner in the eyes of buyers and makes depreciation much less costly.
Keep the miles in check
If the car has fewer miles on its odometer, then the resale value will be higher. If a vehicle has been driven more, the chances of it malfunctioning increases.
Accidents have dual damaging effects on your car. Major accidents can damage the vehicle more permanently, and not to mention the cost of repairs can practically empty your wallet (if there is no insurance or insurance doesn’t cover the repairs). Another hidden effect of accidents, insurance premium goes up, and an accident report will forever be attached to your car. This harms the resale value of your car severely.
Keep it clean
A clean car is a reflection of its owner. Regularly vacuuming, using fabric and car freshener spray, avoiding eating and drinking in the car, maintaining the leather seats, and frequent trips to car wash, are some tips that can go a long way to preserve the value of your car.
Avoid non-standard modifications
People tend to customise their cars with unusual modifications to make it stand out from the rest of the crowd; personalisation may render your car less attractive to prospective buyers. While the option is great in the short term, it may not be practical in the long run as buyers may not be too keen to pay for the customisation.
Lower your depreciation when you sell
Two main pointers that can assure you to get the best deal when you want to sell your car are:
Identify the right time to sell
Based on your car’s specifications, build and model, identify the strengths and gauge the market for your vehicle. For example, a convertible might not be in demand in winter as much as it is in the summers. Also, keep continuous tabs on your car’s model, discontinued or upgraded models could lose considerable value.
A private buyer might be a better option
While many people might prefer exchanging their old car for a new one at a car dealership, it is usually a trap to get you to sell the car at a lower rate than what you could have gotten in the market. If you are not in a hurry, take the time to search for private buyers that will help you to realise a much higher price for your car.
By staying updated and making smart decisions, you can reduce depreciation costs, ensuring that you lose less money!
Photo by Erik Mclean on Unsplash
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