“A new car depreciates the minute you drive if off the showroom floor.” This sentence is one that you can spot in just about any article on the internet that dispenses advice on buying and selling cars.
But it’s seen so regularly for a reason – it’s true. What’s not explained as often, however, is why some cars keep less of their retail value than others.
It could be good to know though, because it can aid you in possibly making a better choice the next time you’re out shopping for a car.
Here are some of the most common factors that influence the resale value of a car:
Brand and model
Reputable car brands that are trusted by consumers, and that have stood the test of time, have higher resale values than newer brands or brands that are seen as untrustworthy.
This is why cars from industry stalwarts, like Ford, Volkswagen and Toyota, remain popular choices with consumers.
Popular models are also destined to keep more of their retail value than unpopular models. This is the age-old market influence, supply and demand.
If an item is sought-after, it will fetch a higher price than a less desirable item. This is even true for products with similar characteristics and features.
New or not
New cars depreciate a lot quicker than older models. In fact, it has been shown that a new car loses most of its value within the first year. Thereafter, depreciation happens slower.
This does not mean that new cars are a bad bet. Keep in mind that new cars come with the benefit of warranties and maintenance plans, and the peace of mind that comes with being the first driver of a car.
That said, the golden middle ground could be buying a car that’s a year or two old. It will likely still be under warranty, with a maintenance plan, and you would avoid the serious losses suffered in the first 12 months.
The condition of the car
It is unrealistic to expect a battered and bruised car to be of value to a buyer. Consumers won’t hand over their hard-earned money for a car that’s been in accidents or that’s covered in rust. Of course the mileage plays a big role here as well – the higher the number on the odometer, the less an owner is likely to get for their car.
This is technically not a reflection of the condition of the car, but it does of course show that the car has been on the road a lot.
There is a reason why there aren’t many cars on the road in bright orange and green – these and other out-there shades only appeal to a small margin of the market. This means the bulk of consumers won’t be willing to invest in cars in these colors, making these cars less desirable, and thus they show more depreciation. Some safe colors to go with are always white, silver, grey and black.
So, how does one go about making the right choice when purchasing a car?
Before you sign on the dotted line for private vehicle finance, make sure it’s for a reputable brand, and a model in the right color and with popularity that will last.
Then, once your new car is in the garage, be sure to look after it so that its next owner will be happy to pay the asking price.
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