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Depreciation is the big hidden cost of running a car.
This is the case whether you pay with your own cash or through a lease deal. Most new cars will tend to lose 50-60% of their value in the first three years of ownership.
To help minimise the hit of depreciation, here are our top 20 tips to keep it as low as possible.
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Buy the right car
Sounds obvious, but it’s amazing how many of us can let our hearts overrule our heads when it comes to choosing our next car. A little objectivity is always a good thing, so do your homework and see which models are the best sellers on the used forecourt so you know which is the one that will have a queue of keen buyers when you come to sell up.
There’s still a place for letting your heart have a say in your choice of car. If you are desperate to drive a particular make and model, the chances are others will feel the same when you come to move your car on. Just be careful to keep your impulses in check after an exhilarating test drive – take the time to cool down and make a rational decision before handing over any money.
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Pick the right fuel
Fuel economy is one of the most important factors for most car buyers, but it also pays to think about future-proofing your next car by choosing the right fuel that it runs on. Diesel may be a pariah in the news, but it’s still the right option for many who cover large distances or need a bigger car for work and family needs.
If you’re driving centres around town, an EV (electric vehicle) makes a lot of sense and their values should hold up well as demand grows. Picking an EV with a longer battery range will make it more attractive to a greater number of buyers in the future and shore up its value to better resist depreciation.
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Choose nearly new
The steepest drop in a brand-new car’s value comes the moment it drives off the forecourt for the first time. In that instant, it becomes a used car, so why not sidestep that financial hit by choosing a car that’s barely been used but comes with a substantial saving on the list price?
Many dealers offer generous discounts on nearly new models that have been used as demonstrators or pre-registered, which is a way of boosting their sales volume. The only downside of a pre-registered car is your name will not be the first in the logbook. If you don’t mind that, you can drive off in a car that is new in all but the name on the on logbook.
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Go low
An alternative to a new or reasonably young car is to go in the other direction and choose one that has done all of the depreciating it’s going to. There’s a strong case for Bangernomics as many cars built in the last couple of decades are largely resistant to corrosion and come with most of the mod cons you could ask for, including plenty of safety kit.
Buying a cheap used car is a gamble, though, as you may well have to spend more in maintenance to keep it running well and getting it through its MoT test. For those able to wield a spanner and torque wrench at home, this is less of an issue, but you still need to choose a car wisely to steer clear of anything that is one problem away from the scrap heap. You will also have no say over specification and colour at this end of the market as condition is what really matters.
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Study history
Don’t worry, we don’t mean a dip into the Renaissance artists of the 15th century but a close look at a used car’s previous life. Check through the service book to see the car has been maintained on schedule, and be sure those stamps are genuine by calling the dealer. Many service records are now held digitally, so ask for printouts rather than being fobbed off that you can access them when you’ve bought the car.
There are plenty of online tools to help you find out a car’s ownership and MoT history. These will give a detailed view of how well the car has been cared for as it’s aged. You can also check if the car has any outstanding finance or has been written-off at any time, which will lower its value even if the repair work has been carried out thoroughly.
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Consider leasing
The vast majority of new cars in the UK are funded through some sort of finance deal and most with a lease. This means you never own the car, merely rent it for the duration of a contract, which often includes all running costs other than the fuel you put in. It allows you to drive a brand-new car or one that you might not otherwise be able to afford as you are only funding the cost of depreciation between its list price and what it’s predicted to be worth at the end of the deal.
The downside to leasing is you will be restricted on the mileage you can cover in the car before paying a penalty for overstepping this. You never own the car, so there is no asset to part-exchange or sell when you want another car, and you may have to pay a penalty if you want out of the deal early.
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Is a new model imminent?
The arrival of an all-singing, all-dancing new generation of car usually signals a drop in the used values of the outgoing model. This is partly due to the departing version suddenly looking outdated and also because new buyers will often delay their purchase for the new model rather than take an old one. However, that can represent an opportunity to the savvy buyer to pick up a bargain where dealers are keen to clear their forecourts of lingering stock.
There are also instances where the replacement model is not as well received as the outgoing generation. For instance, great as the Porsche 718 Boxster and Cayman are, many felt the earlier six-cylinder models were purer cars and values have held up superbly as a result.
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How many owners?
Like it or not, the number of owners in a car’s past can put off a lot of buyers. The thinking goes that why would someone only keep a car for a short period if it was any good? There can be myriad reasons for a car changing hands regularly, such as affordable soft-tops or performance cars that many own for a brief period to satisfy a desire and then move on to something else.
For the canny buyer, a sound car with more owners than is desirable presents the chance of a bargain. A lengthy list of previous owners is a powerful bargaining tool and, if you intend to hang on to the car for the long-game, can average out over time so it’s not an issue when you sell up.
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Haggle on the price
It’s stating the obvious, but the more you save up front, the less you lose when you come to sell. It’s amazing how many buyers still don’t haggle over the price of a car, but don’t be shy. No matter what the make and model, new or used, it’s always worth putting in a lower offer. What’s the worst that can happen? It’s politely declined.
With new cars, if there’s no room to lower the asking price, try to haggle some extra equipment, an extended warranty or service package. Every little you chip away now is less you’ll be paying out in the future and reducing your overall ownership costs.
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Colour
Unless your heart is set on that purple metallic flip paint, it pays dividends to consider colour choice before buying. There’s a good reason most cars on the road are in sober dark metallics, silver, white or simple base hues: it’s what the vast majority of drivers prefer. Simple market forces dictate that it makes sense to choose one of these colours to make your car more attractive to a wider audience when you sell.
This doesn’t mean you cannot indulge in a splash of unusual colour. Some cars suit bright shades, such as city cars and superminis, while bolder paint schemes can make a car more desirable such as with certain Renault Megane RS models or rarer Porsche 911s where the colours mark it out from the herd.
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Maintenance
Look after your car and it will look after you. This is just common sense and good practice so your car is always on the button and reliable during your ownership. It also repays you when you sell as a car in tip-top health will drive properly as it should and shows a history of caring, conscientious ownership.
Routine maintenance you can do yourself includes checking fluid levels for the brakes, engine oil, coolant and washers. And don’t forget to check tyre pressure and condition while you’re at it.
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Service history
Do not underestimate the attraction of a fat folder of service bills, so keep everything you ever spend on the car. This includes all the big ticket items like services and tyres, but also the smaller things like wiper blades, bulbs and washer fluid. The more meticulous your records, the better a picture you present to any buyer.
A service book packed with a reputable garage’s stamps at all of the appropriate intervals imparts a sense of trust and relief in a buyer’s mind. Keep all of the records together and in chronological order so a buyer can see the car’s service life and what a caring owner you are.
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Sort faults before the MoT
The annual MoT test can throw up all manner of faults with a car that are then recorded on the fail sheet available for all to see online. This can send alarm bells ringing with potential buyers and push down the price you get, so have your car checked out before the MoT and have the problems addressed.
Not only does this give you the peace of mind of driving a car that is in good health, it also means you’ll have a fault-free MoT record that makes it harder for a buyer to chip away at the price.
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Keep the miles down
Modern cars are capable of racking up huge mileages, but the wariness of buyers about high-mileage motors persists. So, keeping the miles on your car to a reasonable average for its age is a way to minimise depreciation. Depending on the make and model of car, this can mean an annual mileage of around 10-12,000 miles is perfectly acceptable, but with supercars that can be as little as 1500 miles per annum being considered sufficient not to affect value too much.
The flipside to this method of depreciation dodging is that cars need to be used to keep them in good fettle. Regular use keeps moisture out of vital mechanical and electrical components, circulates oil and other vital fluids, and keeps the car ready for use when you need it.
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Stay standard
Most car owners’ idea of modifying their car is likely to extend no further than a roof rack or cycle carrier, which is fine. However, cars that have been changed too much risk becoming so personal they have an appeal limited to one driver and that person already owns it. Try to sell and nobody will want it.
This applies to some of the personalisation options available with many news cars. Go mad with the extras when you spec it and it can end up being too far outside most buyers’ preferences. This isn’t to say some choice options cannot enhance a car, such as larger original equipment alloy wheels, leather upholstery and electric seat adjustment. Additions like these make the car a more pleasant place to be for all owners and will bolster its value to minimise depreciation.
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Clean up
All but the laziest car owner will give their motor a spruce up before selling. However, to really help offset depreciation you either need to give the car a complete, deep detail valet or stay on top of the cleaning regime. A professional detail can run into hundreds of pounds, which will most likely cancel out any money it saves in depreciation.
A much better route is to keep your car clean inside and out as part of your routine. A weekly wash and brush up prevents grime building up and odours taking a hold. It’s also a chance to spot any scratches or dings that need to be addressed, as well as giving you the up-close chance to inspect wheel and tyre condition.
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Don’t ignore damage
It’s easy to take a mañana approach to dealing with small scrapes and scuffs to the point where you become blind to them. This is a mistake even if you have the damage rectified before sale. Ignoring them can mean the damage becomes deeper and more expensive to fix, especially if bare metal is left exposed to the elements and begins to corrode.
Keeping on top of dents and damage also means you’re much less likely to forget or miss something that a buyer will spot. That keeps the price you achieve higher and closes the depreciation gap. There are many low-cost mobile repair services available that can sort this type of work without the need for the car to be off the road for several days.
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Hang on to your car
One way to minimise depreciation is to spread the cost over the longest possible period by keeping the car for as long as practical. If a car already fulfils all of your needs, there’s no burning reason to change and depreciation can be sidestepped.
If you hold on to your car till it’s worth next to nothing, you might end up with a car may be all but worthless but at that point depreciation ceases to be an issue. Also, by this point, depreciation will be spread over such a length of time that its annual figure will become an ever smaller figure in its whole life costs.
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Buy a classic
There’s no firm point at which an old car becomes a classic, but choosing astutely is almost guaranteed to do away with depreciation altogether. While the quick flip profit of dealing in classic cars is a fallacy for all but those in the trade, running one as your everyday car need not be difficult. Plenty of younger classics from the 1980s and ’90s are perfectly able to perform routine duties while suffering no drop in value.
A well maintained classic is even likely to gently appreciate in value and help offset running costs, which will be higher than a modern car’s. Enjoying depreciation-free driving might also mean foregoing some of the comforts and safety of new cars, and you will have to be rigorous at maintaining a classic for it to retain its value.
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Sell at the right time
The only true way to discover the value of your car is to sell it, but you can help here by choosing the right moment. There’s a good deal of sense in selling a convertible in early summer as everyone takes a fancy to open-top driving, or flogging a 4x4 just as winter sets in. However, there are other factors to consider such as summer and Christmas holiday periods when people tend to be spending on holidays and presents rather than cars, so avoid these times when selling if you can.
In the UK, the half-yearly number plate changes in March and September mean there’s a glut of used cars on the market, which pushes prices down. Steer clear of these periods to get a better price and keep depreciation to a minimum.
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