- The best cars for depreciation revealed
- How is depreciation calculated?
- Why understanding depreciation is key
The cost of depreciation – the value your car loses while owning it – is often more than what you spend on fuel or insurance. So it’s vital to consider this when choosing a used car. Let’s look at why some cars hold their value better than others.
Why cars depreciate
Cars depreciate at different rates, which can be tricky when looking for a car. Generally speaking, older cars depreciate at a slower rate than new ones. So a brand new car is likely to lose more of its value than an older one.
It’s not just about age though. Rarer, more desirable models will depreciate much slower than popular big sellers. A car that’s unusual or unique may even grow more valuable over time, like some classic cars.
The badge can also help hold a car’s value, as some are more in demand than others. Especially when there’s a buzz about them when they’re launched, like MINI for example.
How depreciation is calculated
There are firms that specialise in used car valuations. They gather reams of data on sales numbers, whether the cars are being bought privately or as commercial fleets, to give finance companies accurate information on depreciation.
How much a car depreciates is usually given as a percentage of its new price and called ‘retained value’, or RV in car dealer speak. If a car still holds around two thirds of its original value after three years, then it’s doing well. By contrast, heavily depreciating cars will only hold around a third of their original value new after the same time.
Which cars depreciate least?
How much a car depreciates is partly down to demand. More popular vehicle types will generally hold their value better, like the chunky-looking SUVs we see everywhere nowadays.. Drivers love their high driving position so it’s no surprise that SUVs generally hold their value much better than hatchbacks or saloons from the same brands.
Then there are the manufacturers. More upmarket brands such as Land Rover, Porsche and Audi typically hold their value well. When a new model is launched, lack of initial availability can slow depreciation. Rave reviews in the press can also increase desirability and help cars cling to their value.
Fuel type is also important. Electric cars used to be famous for shedding value because people were suspicious about buying them used. But as more premium manufacturers have launched battery-powered cars and acceptance of electric has grown, so depreciation has slowed.
There has also been lots of concern about the price of diesel cars slumping. This is due to fears about them being polluting and increases in company car tax and Vehicle Excise Duty. However, because this has resulted in fewer new diesel cars being sold, the reduced supply has kept used prices strong.
A good rule of thumb is that the rarer a car is, the less it’s likely to depreciate. That’s why sports cars such as Ferraris and Lamborghinis tend to hold their value brilliantly.
Which cars depreciate most?
The more mass market a car is, the faster its value is likely to fall. Brands such as Ford, Vauxhall, Nissan and Citroen rely on selling large volumes of cars to make their money. They sell many of their cars to fleets at a hefty discount. As a result, when the cars come onto the used market, there’s likely to be a flood rather than a trickle, causing prices to fall as supply outstrips demand.
Why is knowing about depreciation important?
Knowing about depreciation is more important for brand new and nearly new cars.
Depreciation is factored into the way monthly payments on finance deals are calculated relies. The faster a car loses its value, the higher your monthly payments will probably be. So cars that depreciate more slowly offer better value for money.
If you’re canny about it, you can use knowledge of depreciation to your advantage. Some large luxury saloons, for example, lose value quickly. So you can buy a very good-looking car that’s only a few years old for relatively little. If you want to buy a car to keep as long as it still works, depreciation won’t be an issue.
So if you find a car that’s cheap to live with or one that simply makes you smile every time you get into it, go for it however well it holds its value. If it does depreciate heavily, you might even pick it up as a bargain – another reason to make you happy!
10 Slowest depreciating cars (according to What Car?/CAP HPI)
- Range Rover Evoque
- Porsche Cayenne E-Hybrid
- Audi e-tron 55 quattro
- Porsche Panamera Sport Turismo E-Hybrid
- Porsche 718 Cayman 2.5 GTS
- Audi Q8 TFSI quattro S-Line
- Alpine A110 Pure
- Porsche Macan 2.0T
- Toyota RAV4 Icon 2.5 VVT-i Hybrid 2WD
- Toyota Prius 1.8 VVTi Active
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