Buying a new car has got to be among one of the worst financial decisions you can make. The reason for this is that brand new cars depreciate the fastest out of any on the roads. Typically they will lose around 11 per cent of their value the instant they leave the forecourt. One of the best ways to stave off depreciation is buying a used car because the rate of depreciation is less severe and you are likely to lose less money. If you buy second-hand or nearly new, the rate of depreciation should be gentler.
James Fairclough, CEO of AA Cars has collected together some factors which affect car depreciation.
Mileage – Mileage is a big factor in determining a used car’s value. Generally speaking, as mileage increases, so does wear and tear. Vehicles with a lot of miles on the clock are usually worth considerably less than the same model with below-average mileage.
When buying a used car, be wary of ‘clocking’ (the process of changing the genuine mileage to a lower figure to make it more attractive to potential buyers). The best way to make sure that a car has not been clocked is by checking the car’s MOT backlogs with the DVLA (Driver and Vehicle Licensing Agency).
It is mandatory for vehicles more than three years old to get an MOT every 12 months, and the mileage should be recorded each time.
Condition – A car’s condition will have a significant impact on its value. To protect your car from excessive depreciation, you should take good care of it.
Vehicles with scratches or dents on the exterior, scuffed tyres, torn or damaged interior, electronics that don’t work, or other similar issues will be less sought after and therefore worth less money.
In order to reduce the loss in value, motorists should repair any dents or scratches on the bodywork, and clean any stains on the carpet or upholstery, as soon as they can.
Popularity – More popular makes and models will hold their value better due to the high demand for them.
Sports and luxury cars naturally retain their value as there is often more demand than supply. However, there are also some very popular mainstream cars that hold their value well as they are consistently in-demand year on year.
Fuel type – Generally speaking, vehicles with good fuel economy will hold their value better. For example, electric vehicles (EVs) and hybrids tend to depreciate more slowly than traditionally fuelled vehicles, with diesels depreciating the quickest due to government taxes and the additional charges now being levied in many UK cities.
Documentation – Having the appropriate documentation when selling a car can really impact its value. Buyers will want to see the car’s handbook, registration document (V5C), MOT certificates and a full service history.
To avoid depreciation of your vehicle and maintain its value as much as possible, you should keep all important documents, including all receipts and invoices for major work completed or parts fitted. Many documents can now be found online making it easier for both buyers and sellers.
One thing that buyers should bear in mind is that they can purchase a full car history check for extra peace of mind.
These tend to be very inexpensive; for example, the AA charges at little as £6, and it is included for free with all cars listed on AA Cars, the AA’s trusted resource for buying a used car, and its very easy for potential buyers to access this info as it’s visible on the car details page on the site.