The cars that depreciate the fastest

by Rachel Wait on 11 July 2011  |  18 comments
Tweet

If you're buying a new car, don't lose more money than necessary!

Buying a car can be pretty exciting. After all, who doesn’t like the idea of whizzing around town in a shiny new automobile?

There’s just one problem: If you are buying a brand new car, the price of that car is likely to plummet the minute you drive off the forecourt. As depressing as it sounds, the minute you get into your new car and drive away, the value of your car can drop by thousands of pounds.

What’s more, Which? reckons cars only retain around 40% of their original purchase price after a typical three years and 36,000 miles of ownership, although some are worth a lot less than that.

This means that you’re actually better off buying a used car rather than one that’s brand new. That said, if you really do want to buy a new car, it’s worth noting that some cars depreciate in value far quicker than others. And as a result, these are the ones you should avoid!

The cars that lose you money

Which? recently carried out some research to reveal which cars are the worst offenders when it comes to depreciation. So let’s take a closer look at which cars lose their value the quickest.

These have been broken down into categories – superminis, medium cars, large cars, luxury cars, MPVs (multi-purpose vehicles), 4x4s/SUVs (sports utility vehicles) and sports cars. The table below highlights the worst offender in each category:

Source: Which?

So now you know you should stay well clear of these cars, unless you want to lose thousands of pounds! But what are the alternatives? Are there any cars that hold their value a little better?

The cars that hold their value best

The table below highlights the best car for each of the categories used above.

Source: Which?

If you’d prefer an estate car, the best car here is the BMW 320d (184bhp) Touring Sport Plus Edition. The listed price is £31,720, while the discounted price is £26,101 and the residual value is £14,272 (55% of its original price).

So if you are after a new car, the sensible decision would be to choose one of these cars as at least they hold onto their value more than others. That said, given the price of many of these vehicles, you may need to win the lottery before purchasing one!

Tips for buying a new car

If you are planning to buy a new car, make sure you follow these top tips to ensure you’re getting the best deal.

1. Do your research

Before buying a car, you should always take the time to research what price you should expect to pay so that you don’t get ripped off. Check out sites such as AutoTrader to make sure you are paying the best price.

2. Set a budget and stick to it

Work out exactly what you can afford to spend on a new car. Sit down and work out a budget to help you assess this.

Once you’ve decided the maximum limit you can go up to, ensure you don’t go over this amount. If you’re not getting the price you want for the car, walk away and don’t be tempted to pay more.

3. Test drives

You may not be able to test drive the actual car you’re buying, but you should be able to test drive a similar one. So ask the dealer to let you test drive a car that’s as similar as possible to the one you have your eye on.

Once you’re in the car, don’t just drive it around the block. If the dealer will let you, see if you can borrow the car for an evening to give you more of a feel for what the car would be like to drive regularly.

4. Think about additional costs

Don’t forget to keep in mind the cost of car insurance and tax. The cost of these will depend on what type of car you have. Generally, the larger the engine size on the car, the more you’ll be paying in insurance. Meanwhile, tax is charged according to CO2 emissions.

If you’d like to know which car insurance group your chosen car will fall into, take a look at the Association of British Insurers’ Database. For tax bands, check out this page on the Directgov website.

Related how-to guide

Buy a car for less

A car is a significant purchase. Take your time and ensure that you get the best possible deal.

See the guide

5. Consider your needs  

Before you sign on the dotted line, you should also think about your needs. After all, what do you really require the car for? How many people will be in the car on a regular basis? Do you want to go for petrol or diesel?

There’s no point plumping for something completely unsuitable just because it looks flashy. So consider these points carefully. This handy cost calculator may also help you to decide whether getting a diesel car is more cost effective than petrol or vice versa. (It ultimately depends on how far you drive.)

6. Consider payment options

You also need to think about how you’re going to pay for your car. The most obvious and most sensible way is to pay for it out of your savings.

However, if your savings aren’t sufficient, you could also consider a personal loan, dealer finance, a hire purchase agreement, personal contract hire, or personal contract purchase! If you’re confused, take a look at Seven top ways to pay for a new car.

Good luck!

More: The 10 cheapest cars to run | Earn cashback on your car