Understanding Car Depreciation: How to Maintain the Value of Your Car

December 22nd, 2023

Buying a new car is an exciting time. It’s fun to wander up and down a dealership looking at all the new cars to find the perfect one.

Of course, when buying a new car, there are several cost factors to consider, such as:

on-road costs
fuel economy, as well as
servicing and insurance costs for the vehicle.

What many people don’t consider, however, is the cost of car depreciation.

In this article, we’re going to take a deep dive into what car depreciation is, why it happens, how to calculate car depreciation and the steps you can take to help maintain the value of your car over time.

If you’re thinking of buying a new car soon, this article will help you to make a more informed buying decision.

What is car depreciation?

Car depreciation refers to the amount of value that your car loses over time.

Of course, while some cars can hold onto most of their value over their lifetime, others lose a significant amount in the first year alone.

For this reason, it’s important to understand the different factors that affect the rate at which a car depreciates.

Why do cars depreciate in value over time?

Here are some of the most common reasons why cars depreciate in value over time:

Age

Most things, unless they’re collectibles, tend to become less valuable as they get older.

Condition

Every car naturally suffers some form of wear and tear the older it gets and the more it gets used.

Mileage

The more you drive your car, the more likely it will need repairs – hence it depreciates in value.

As well as these, the mere fact that car manufacturers are always coming out with new cars every year means that, even if you buy a top-of-the-line model, it won’t stay top-of-the-line for long.

How much do cars depreciate in value over time?

As mentioned, each car depreciates at a different rate, but there are rough guides you can follow to help you understand the average rate of car depreciation and how to calculate car depreciation.

Generally, a new car will lose around 20% of its value in the first year of ownership. This includes the 10-15% it loses the moment it’s driven out of the dealership (yes, that’s a true fact!).

Over a five-year period, the average car loses around 40% of its original value.

Why do some cars depreciate more than others?

There are a few key reasons why some cars depreciate more or quicker than other cars do:

Make and Model

Popular cars, such as small SUVs and family cars driven by the masses, tend to hold onto their value longer than, say, luxury cars which are much more costly to run and maintain.

Factors such as colour and fuel efficiency also play a role in car depreciation and resale value as well.

Level of Demand

Some cars are just in much higher demand than others on the market.

If most people want an economic mid-sized SUV and they’re hard to come by right now, your SUV is going to be much easier to sell than a high-end two-seater car that chews through fuel.

Brand Reputation

A high-quality and popular branded car that doesn’t cost a lot to keep it running is going to hold its value far longer than a car built by a manufacturer you’ve never heard of with parts that are almost impossible to get replaced in Australia.

Now, we’re going to give you a few tips to help minimise your car’s depreciation as much as possible.

What are the best ways to maintain the value of your car?

There are several things you can do over the life of your car to help it maintain its value:

Do Your Research

First and foremost, when looking to buy a new car, spend some time researching the cars that hold their value better than others.

Look for cars that will still be in high demand as used cars, and remember factors such as colour and style when considering resale value too.

Keep Your Mileage Low

You want to enjoy your new car and use it as much as you need, but if you’re looking to sell it in a few years, try to keep those long drives on the open road to a minimum.

A 5-year-old car with only 60,000km on the odometer is going to sell for more than a similar car that’s already ticked over 100,000km.

Take Great Care of Your Car

This one is a no-brainer. Get your car serviced regularly, in line with the manufacturer’s recommendations. Keep it clean, inside and out. If there’s any damage, like small dents or paint chips, get it taken care of immediately.

Hopefully, by now you have a better understanding of how car depreciation works, and you can use what you’ve learned to help you make better decisions when buying and maintaining your new car.

Of course, if you’re looking for help when buying your new car, Private Fleet can help.

Find the right vehicle at the right price with Private Fleet

Private Fleet empowers you to gain all the benefits of a fleet purchase but as a private buyer.

Backed by decades of vehicle industry experience, fleet buying power and a network of car dealers across Australia, we are here to ensure that buying your next vehicle will be as straightforward as possible for you.

Shopping for a car is an enjoyable process – let us make it hassle-free, too.

Reach out to us today for a seamless and simple car-buying experience.