What is depreciation?
Before we delve into how deprecation affects the value of your vehicle, we must determine what it is. In basic terms, depreciation is the reduction in the value of an item due to factors such as wear and tear, age, obsolescence and any other cause for the loss in value of a physical or tangible asset.
Why does my brand-new car depreciate?
Aside from fuel, deprecation is your next biggest mobility-related cost, so why exactly does a car you have just taken delivery of depreciate immediately? The biggest factor is that once you have driven that car off of the showroom floor, it is now 'used' and will be worth less in the market.
What would make my car depreciate more or less?
There are several factors that determine your vehicle's rate of depreciation and they include, but are not limited to:
- Age
- Mileage
- Condition
- Balance of service plan and warranty
- Service history
- Number of previous owners
- Demand for the vehicle
- Vehicle type
- Aftermarket modifications
What is an average depreciation rate?
There is no average depreciation rate for a vehicle, however, you can expect a loss in value of between 10-25% per year, with the first year of ownership being the highest percentage of deprecation and each subsequent year likely being lower than the last.
How does depreciation affect the value of your car?
In short, deprecation negatively affects the value of your car, causing it to be worth less and less with each passing year. The caveat to this has come amid the global pandemic, where a shortage of new cars has meant that many used cars have appreciated in value, however, when supply stabilises, the market is likely to return to its former state.
