Car depreciation is one of the biggest problem with cars, financially speaking.
Whether you buy the car new or used, car depreciation is going to plague your budget sooner or later.
Slowing it down and keeping the proper value of your car overtime means saved money. Money saved is money earned, as the saying goes.
This article will hopefully provide you with some basic guidelines and help you with the car depreciation problem.
WHAT IS CAR DEPRECIATION?
A basic definition of car depreciation would be:
Car depreciation means that your car will inevitably lose value overtime which will lead to a money loss.
You see, the car is essentially a mechanical product that is heavily used on a regular basis which means that it wears out over time.
This fact, on its own, means that it will lose value.
Combine this with today’s car market philosophy whose main motto is “out with the old, bring in the new” and you have yourself a recipe for car depreciation.
It’s a gradual process that slowly creeps on your budget and if you’re not careful and well-informed, you can lose a hefty sum of money.
Car depreciation hurts the most when you want to sell or replace your present car. Here the negative effect is best seen.
If you want to read about the definition of car depreciation in more detail, click here for a great explanation on Wikipedia.
HOW TO SLOW DOWN CAR DEPRECIATION ON NEW CARS?
Every drivers dream is to sit, drive and own a brand new car.
Everything is shiny, gleams, no scratches anywhere and the odometer states 0 (zero), just waiting for you to sit in it and be the very first driver ever.
This is great from a drivers experience point of view but from a car depreciation point of view, things are not that shiny.
Here’s the cold and outright truth: most car depreciation happens on new cars in the first five years or so.
All depending on the car model, brand and your car market, the car depreciation can go from 10 to even 30 percent in the first five years or within the first 30.000-50.000 kilometers (rough estimate).
To paint a picture, just as you’ve “broken in” the car, got used to it and perhaps grew fond of it, you will start losing money on it.
In order to slow this process down, try doing the next:
Buy a new car that’s market friendly in your country
Best prevent car depreciation in the very beginning. Better safe than sorry.
When choosing a car brand and model always have the depreciation factor in your head. Do some research before buying what brands and models have the least depreciation on your market.
As you’ll see, certain models hold their ground very good in future times. Also, they are more easy to sell.
So before choosing a car, take a look on the internet or visit dealerships to get a clear picture of what the situation is like.
Also, take a look at how the predecessor of the model you want did in the past. If the price plummeted shortly, you’re probably going to have the same problem.
Stick to the manufacturers that are trusted and respected on your market, even if it means not buying your dream car.
Have an impeccable service record
An impeccable service record is a great shield against car depreciation.
Having a properly filled-out service booklet means that you took good care of the car.
This will mean increased value in the future. Especially for selling or swapping the car (like old-for-new arrangements).
A dealership will consider this factor for sure (like when making an estimate of your car).
If you want to sell your car privately, potential buyers won’t haggle that much once they’ve seen a good maintenance record. Everyone knows that this is saved money in future repairs.
So, ALWAYS keep track of the maintenance. Don’t miss a stamp or a traceable electronic record at the car service, however minor the intervention may be.
Also, since it’s a new car, see that you do all of the maintenance at a licensed dealership or garage. Make sure that you respect all that is needed within the guarantee period.
Paper or electronic trace is the golden rule on this part. Without a trace, you can talk all you want; it’s just hear-say.
Do regular and quality car maintenance
Along with keeping track of the maintenance, car depreciation is slowed down by keeping good care of your car (mechanically speaking on this part).
Of course, every driver that wants to be safe on the road, will always make sure that his/her car is in top condition.
But as we all know, a lot of drivers do only necessary repairs. Negligence usually leads to even more problems and costly repairs. Not to mention the fact that with a maintenance like this, the overall condition of the car drastically deteriorates over time.
Combine this with using low quality parts, oil, filters etc. and you’ll have a ruin in no time. Simply,bad running condition means higher level of car depreciation.
So, if possible, always use quality parts and service and do the maintenance on time.
If you’ve seen car owners with cars that are in great shape although they have over 200.000 kilometers on the clock, this is one of the main reasons.
Wash and clean the car on a regular basis
You wouldn’t believe how much looks affect car depreciation. A well-kept car, in terms of cleanliness will sell for better money in the future, that I can guarantee.
Since you’ve bought a new car you have a unique chance to keep it in prime condition. Unlike with used cars, where almost every car is damaged in some way, new ones are ground zero for keeping top condition.
Key factor here is being vigilant. This will sometimes seem as an annoyance but it is the only way.
Regular washing, vacuuming, cleaning stains or else has to become second nature.
Make a washing and cleaning routine for yourself, best perhaps once a week.
If you use the car more frequently, drive kids in it or like to eat in the car do this even more often.
Just don’t let the car become a pig stack. Negligence will, overtime, cause nasty stains, marks, rust on the exterior and else which will certainly deteriorate the overall condition and looks of the car.
Keep the car in a garage
A car garage will lengthen the “life “of a car for at least a decade.
Only think how many snows, hot summers, rains and other conditions will the car body, undercarriage, paint and else be spared of.
If you buy a new car, consider making a garage in the near future, if you already don’t have one.
It doesn’t have to be a fancy garage with heating and tiles, even the most simple one made out of panels will do the basic job.
An investment that will pay off for sure through keeping the car in good condition.
Good condition, as mentioned, means less car depreciation.
Lease a car
Now this advice highly depends on the situation on your car market and the conditions of leasing.
A good leasing can be much better than a bad loan or a costly ownership.
Here, the key is how you see a car, as a liability or an asset.
In my opinion (aside collectibles and old timers which are a long-term investment), the car is a liability which costs money over time.
If you’re of the same opinion then a good leasing arrangement will do the job. Especially since lots of these arrangements have things like discounts on maintenance, tires, etc.
Don’t be a slave of the idea of ownership if it costs you more money.
Maybe the best side of a good leasing arrangement is that you don’t have to worry about car depreciation at all.
When the car starts making problems, simply replace it with a newer one.
Watch your driving habits
Some fair treatment of your new car will go a long way. Although the car is new, treating it like a hot-rod most of the time will cause car depreciation.
Bad driving habits will cause the overall condition of the car to deteriorate. A heavy foot on the pedal, hard starts, driving the car to its limits will make the car a heap of junk in a matter of few years.
So every time you get the urge of being a race driver, remember that every “molesting” has its price which you will pay later down the road through a higher depreciation level.
HOW TO STOP CAR DEPRECIATION ON USED CARS?
Unlike new cars, used cars have already passed the initial car depreciation.
Despite this, there is more money to be lost in the future so although it’s a used car, applying a similar strategy will save some money and slow down the process.
Here are the recommendations:
Always buy a used car that’s popular on your car market
This is a golden rule with used cars. As with new ones, you’ll see that there are brands and models that hold their ground pretty good. In terms of price namely. People simply love these brands and models and will pay good money for them, even after a prolonged period of time and exploitation.
This means slower depreciation and a faster sale in the future.
So, once you notice that deprecation is beginning, you’ll be able to sell the car in a short notice.
This way, further depreciation will be a problem of some other car owner while you’ll be able to take some good money instead of losing it over time.
Buy a younger used car
A best buy, in my opinion is just after the initial car depreciation has happened (the mentioned 10-30 percent). Most of these cars will be in good shape and well maintained. These are mostly 4-5 years old and under 50.000 kilometers on the clock.
In most cases, you’ll get a car as good as new for a significantly lower cost.
Simply put, most of the depreciation was paid by the previous owner (when it was new). You get the rest.
Main goal on this part is to find a well-preserved and maintained car.
If the used car has faults, try to remove them as much as possible
Once you’ve bought a used car, it would be best (if you have the means) to make any necessary repairs.
This is where buying a used car in good condition is critical. Better condition means fewer repairs meaning less money spent.
As with new cars, keeping prime condition is essential to prevent car depreciation.
Any kind of rattle, squeak, check engine light, minor dent or else will be a problem.
A car that has none or some minor faults is certainly less prone to car depreciation.
Invest in the looks (rims, hubcaps,upholstery, car cosmetics, some aftermarket equipment etc)
Looks are everything, many people will say. And they won’t be wrong so much especially regarding used cars.
Matter of fact is that a lot people care about how the car looks. Even if the car is in perfect mechanical and driving condition, a poor and soggy look will cause car depreciation.
Investing some money in a nice set of rims, hubcaps, interior trimming, fancy armrest perhaps even a multimedia system will do wonders.
Best recipe, in my own experience is to use quality aftermarket parts that fit in properly and seem like they were built-in from the factory.
Just don’t go overboard and make a circus of the car. Then you’ll probably produce a counter-effect.
Keeping good and updated looks means slowing down car depreciation, that is a matter of fact.
Keep track of the maintenance (if not maintained in a licensed dealership, keep your own record-receipts, written form or else)
Owners of used cars mostly do not do maintenance in licensed dealerships. They also tend to do a lot of DIY on their cars.
Main reason is the expense; is the licensed maintenance worth the money? Simply, expensive maintenance on a used car seems like throwing money out the window.
Common side effect of this is a lack of written or electronic maintenance data.
As mentioned, no trace of regular maintenance means that car depreciation is next in line.
No paper or trace, down the road, simply means it didn’t happen.
This doesn’t mean that you have to visit a licensed dealership, a good and trustworthy mechanic will probably finish the job and at a lower price.
Point here is to take receipts for every repair that’s been done (especially huge repairs like engine overhauls or a dual mass flywheel replacement).
Even if this isn’t possible, keep a track of your own, something like a mock service book. Write or type dates, costs, what the repair was etc.
This maybe a bit boring and annoying, but second best to having a real service record. This will make a difference in keeping car value in the future.
Know the history of your car as much as possible
When buying a used car, always ask the previous owner for all important service documentation.
Do this especially if you’re buying a younger used car from the first owner.
Main point here: these documents are worth gold as when reselling you can present yourself as the second owner and this on its own carries a significant value.
Car depreciation is faster if you’re the third, fourth or whatever owner in line. Simply, people see your car as worn out and as such will have less value.
Having a good history record will protect you from car depreciation.
Keep the car clean and tidy
Just like with new cars, a used car with a well-kept interior and exterior will stop car depreciation.
This is a bit harder as most of them already have some minor or major damages.
But do the best you can and on a regular basis. With today’s car cosmetics and various enhancements, you can make a difference.
Although used, do the best you can and on a regular basis. A clean and tidy car means less car depreciation for sure.
If you want to learn how to properly wash your car, click here for a separate article on that topic.
Consider investing in alternate fuels (like LPG)
Now this is a big optional advice. Mainly for drivers who drive on petrol, not diesel.
This tip is highly dependent on what kind of fuel is popular in your country, what are the taxes, fuel prices etc.
I feel obligated to mention this as I’ve seen major changes in the car market in my country and prevention of car depreciation thanks to investing in alternate fuel systems (mainly LPG).
For instance, in my country diesels are huge. I think that over 70% of the cars have diesel engines. But with the gas and maintenance prices going up, cars with LPG (Liquid Petrol Gas) systems have started to rise up over the past few years.
To simplify, a car with a petrol engine (at least in my country) is pretty hard to sell in comparison with a diesel one. . But a car with a petrol engine and LPG system will be sold probably in a matter of days and for good money. Maybe even better than the one with the diesel engine.
To put in terms of car depreciation, a used car with a petrol engine will lose money overtime for sure while a car with a combination of petrol and LPG will keep a steady price.
Not to mention less fuel consumption (if you want to learn how to calculate fuel consumption on your car click here for a separate article on that topic).
There are other alternate fuel systems out there, but I hope you get the main idea.
FINAL TIP:TREAT THE CAR AS A LIABILITY NOT AN ASSET
I’m repeating myself on this part but only to additionally emphasize this crucial factor which is perhaps the best advice of them all.
Liability means expense while an asset means a potential or certain profit.
If you want to beat car depreciation and save money in the long run, however many cars you may own, replace, keep or other, best view the car as a liability.
Something that you need and that will create expenses in the future..
Don’t buy a car like you would buy a house. Don’t treat the car like you would treat your house (as a long-term investment).
Cars are meant to be sold on time and losing the least amount of money on them is the main goal.
If for nothing else, then for a newer model for whom you will have more money to buy and which will cost you less in maintenance.
Don’t use this rule only if you’re going to keep your present car as an old-timer or a collectible. If you’re in this situation, you’re probably going to make money in the future instead of losing it.
However you may like your present car, however a future car may appeal to you, remember that your hard-earned money should be in first place.
Fact is that all of these cars, new and used end up on the scrap yard sooner or later. It’s your choice how much of your money is going with it.