Understanding Depreciation In Your Car & How To Slow It Down


Jan 15th, 2021

Understanding Depreciation In Your Car & How To Slow It Down

If you are looking to sell your current car at some point, you will not be able to sell it for the same price you bought it for, say three years ago.

The general explanation for this is that your car has decreased in value over the last three years, and as such, you will have to sell it at a lower price than you bought it. This difference between the price tag at which you bought it and its resale value is known as depreciation. 

Different cars depreciate at different rates depending on several factors, and as such, you should know how slowly or fast your car depreciates and what you can do to manage this rate. This guide will help you understand how the depreciation rate varies with respect to various factors and how you can slow it down.

Factors that Influence Car Depreciation

To manage the depreciation of your car, you need to understand how the following factors affect this decrease in value. 

1. Continuous increase in mileage

The more you use your car, the likelier it will break down and require repair or replacement of a component. Its wear and tear increases, along with a concurrent reduction in the car's value. In short, as the car's mileage increases, its value decreases.

2. Availability of newer models

As production companies strive to create the perfect car for the consumer, there will always be a newer car. After you buy a vehicle, more recent models will come out, and they will likely have more features than your current vehicle. Automatically, your car's value decreases as it will not have the same market pull as the new model.

3. The size of your car

A sedan will depreciate much slower in comparison to an SUV; bigger cars have more expensive parts and are costlier to purchase. Moreover, most of these vehicles are luxurious and easily traded off as soon as newer models appear. 

4. Fuel economy

The amount of fuel consumed per mile also determines the rate at which the car will decrease in value. Generally, vehicles that consume less fuel per kilometre depreciate slower than those consuming higher amounts. Diesel cars, for instance, typically have more fuel-efficient engines than petrol vehicles. As a result, petrol engine cars will usually depreciate faster than their diesel counterparts.

5. The presence and length of a warranty

A car warranty provides cover for any potential issues resulting from defective workmanship by the manufacturer. Cars that have tagged warranties will have higher resale values in comparison to those that lack a warranty. The number of years remaining on the car warranty also determines the value of the car. More years left means a higher value for the car.

How to Slow Down Depreciation

The next step is to evaluate how best you can manage your car to reduce the rate at which its value decreases. Here are some of the recommendations that you should take up.

1. Perform immediate repairs and frequent car maintenance

Any car that is in use is susceptible to minor and major damages. In the case that such damages occur, you should ensure that they are addressed immediately. Damages make the car deteriorate fast, so when repairs are carried out promptly, the car's quality is retained. Cars also need to be regularly taken for maintenance, as it may help uncover underlying issues that ultimately affect the car's value.

2. Use good quality fuel

High-quality fuel from certified fuel stations is essential in ensuring that you effectively maintain your car engine. Do not be tempted by the lower quality fuel that is inadequately refined since while it may be cheaper, it will eventually lead to high maintenance expenses, at which point your car will depreciate speedily.

3. Do not over-customise your car 

Every car owner wants a personal touch on their car, and it can never be too bad. However, when the customisation is overdone, the car becomes too personalised that it turns off potential buyers. This effectively narrows down the demand for the car and lowers its market value. Therefore, it would be more advantageous to you if you customised with items that could easily be reverted to the car's original condition.

4. Always purchase a warranty-covered car

A warranty protects a vehicle from any future defects that may be due to the manufacturer's work. It creates a protective shield for the car's value and thus lowers depreciation. Therefore, a car covered by a warranty is valued much higher than one that is not. 

5. Purchase a reputable brand or model

Industry-conducted customer surveys have determined that some models or brands are considered more reliable than others. It is not only just a matter of opinion but rather a question of what serves the customers best. The dependability of a specific model or brand, as viewed by car owners, holds the car's value significantly high, thus, lowers depreciation.

6. Keep your mileage in check

Mileage is a crucial determinant in a car’s rate of depreciation. When performing car valuation, institutions such as insurance providers always keep an eye on the mileage. To manage your car's value, keep its mileage low.

Wrap Up

Car depreciation is unavoidable; it’s as certain as death and taxes. The key is managing depreciation. For more useful advice related to cars and car ownership, you may visit Carpart.com.au’s blog. Also, to search for car parts more efficiently, please don’t hesitate to use our free tool for locating new and used auto parts online. Try requesting for an auto part today and start receiving quotes!