A car is one of the most costly assets any of us ever buy, but unlike property, it’s not one that has a great record of retaining its value. In fact, depreciation is a fact of life when it comes to car ownership.
So what’s behind it? What causes the value of your car to fall?
1. Driving it off the forecourt
If you want to buy a new car, you obviously have to pay a premium.
Purchasing a car fresh from the factory, with no previous owners, comes with a bigger price tag precisely because there is no chance of any scratches or scrapes, no spilled liquid or food on the interior, no chance of a previous owner being a bit too heavy with the gear changes and having caused some unseen damage.
But that does mean that the simple act of driving that new vehicle away from the dealership will have a dramatic impact on the price of the car, simply because it is no longer brand, spanking new.
According to insurer Insurethegap.com, a car will typically suffer further sharp price drops at one, three and eight years of age. So if you are thinking about selling and you're nearing one of these milestones, it might be worth getting shot of it quickly.
The miles driven in your vehicle will also have a big impact on what it’s worth when the time comes to sell it on.
The fewer miles covered, the better condition the car is likely to be in, and therefore the better the price you’ll be able to get for it.
If you're wondering whether you're driving down the value faster than normal, the typical car racks up 10,000 miles a year according to Insurethegap.com.
3. One careful owner
A big part of buying any used car is finding out about the previous owner.
A car that has only been used by a careful driver to pick up their shopping every week is always going to be more attractive ‒ and therefore valuable ‒ than a car that has been handling an hour commute every day for the last couple of years.
It’s not just about the latest owner though, but the entire number of owners the car has had in the past.
The reality is that if the car has had a lot of owners, there is a greater chance that at least one of them didn’t look after it very well, which could result in issues once you get behind the wheel.
4. How reliable is it?
The manufacturer and model of the car will have a big impact on how quickly the value of your vehicle falls over time.
There can be significant variances in just how reliable different models are.
Some models mean you will spend far more time at the mechanic than others, and putting them right will end up hurting your bank balance.
Check out our piece on the most and least reliable cars.
It’s not just a question of reliability though.
Some brands and models enjoy a price boost as a result of just how desirable they are.
Think about it ‒ the desirability of a Ferrari is far higher, making it more likely to retain its value, than a Nissan for example.
6. Fuel efficiency
There are all sorts of other costs to consider when it comes to purchasing a car besides the actual sales price, with the amount you’ll have to shell out on fuel chief among them.
If a car boasts impressive fuel efficiency, it obviously means you’ll have to stop off at the garage less frequently and get more miles out of each time you fill the tank.
That’s always going to be an attractive feature for a buyer and will help the car retain its value more than those models with a poorer level of fuel efficiency.
7. How safe is it?
All new cars are tested and given a safety rating by Euro NCAP, with the tests covering everything from how well passengers are protected to what technology is included in the car which will reduce the chances of being caught up in an accident in the first place.
If your car has a poor safety rating ‒ or even worse, it has to be recalled due to safety fears ‒ then its value is likely to fall faster than those models with a more impressive score.
For more read, our guide to the Euro NCAP tests.
8. Service history
Any new buyer wants to know that the car they are interested in has been serviced regularly, and by accredited garages.
If there are gaps in the service history, that will impact its value.
According to Insurethegap.com, larger cars are known to depreciate faster than smaller cars.
This is generally down to a combination of the higher running costs ‒ you’ll be spending more on fuel with a 4x4 than a Mini for example ‒ as well as the larger repair costs should things go wrong and you need parts replaced.
10. The warranty
Some vehicles come with a lengthy warranty these days, in some cases for as long as seven years.
If your car still has a valid warranty when you sell it on, that will boost its price as the new buyer knows they won’t necessarily have to foot the bill if things go wrong.