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Understanding Vehicle Depreciation: A Guide For South African Car Owners

Jun 18, 2024 | Car

As a car owner in South Africa, you’re likely aware that your vehicle’s value depreciates over time. But do you know how to calculate depreciation, what factors influence it, and how to minimise its impact on your wallet?  

During these trying economic times, the last thing you want is to have your vehicle breakdown or pack up entirely before its time. To help you ensure that your vehicle lasts longer and runs as smoothly as possible, let’s delve into the world of vehicle depreciation.  

The hope is that this information will provide you with a comprehensive guide to understanding and more effectively managing (perhaps even reducing) this inevitable cost of car ownership. 

What Is Vehicle Depreciation? 

Vehicle depreciation is the rate at which your vehicle loses its value over time, starting from the moment you buy it. Some people think that it’s got to do with what kind of vehicle you buy, but vehicle depreciation is just a fact of life. It’s an inevitable process that affects all vehicles, regardless of make, model, or age.  

How Does Depreciation Work? 

Well, from the moment you drive your new vehicle off into the sunset, it begins to lose its value. Research shows that new vehicles suffer their biggest drop in value within the first year – around 9 to 11%. After 12 months of ownership, you can expect to lose around 40% in value. After three years, the vehicle will have lost 60% of its value. 

It’s not just about the time, though. Depreciation is affected by other factors, including mileage, wear and tear, and the introduction of newer models also contribute significantly. 

Several factors influence a vehicle’s depreciation rate, including: 

  • Mileage: The more you drive, the faster your car depreciates. 
  • Condition: Maintaining your vehicle in good condition can slow depreciation, while neglect can hasten it. 
  • Market Trends: Shifts in consumer preferences and new technological advancements can make older models less desirable, which reduces their perceived value. 
  • Vehicle Type: Different types of vehicles, like trucks, may have a different depreciation life compared to sedans or electric vehicles. 

Calculating Depreciation 

It can be easier to rely on the percentages shared above, but to calculate depreciation, you would need to determine the residual value of a car, which is influenced by make, model, age, mileage, and other factors. The realistic value is linked to numerous vehicle-specific factors, such as equipment, colour, inspection (service) history, and technical and physical (cosmetic) condition. 

Minimising Depreciation 

Generally speaking, vehicles that have a good reputation for lasting a long time, are fuel efficient, and aren’t expensive to maintain are the ones that depreciate more slowly and tend to hold their value. 

That said, depreciation is still inevitable. Thankfully, there are steps you can take to minimise its impact. For starters, regular maintenance will keep your vehicle in good condition, which can slow the rate at which your vehicle depreciates. Unsurprisingly, preventing damage to your vehicle’s body and interior can maintain its value, while being more conscientious about how much you drive and driving fewer kilometres can also preserve your vehicle’s value. 

Feeling Informed? 

Understanding vehicle depreciation is crucial for South African car owners who want to make informed decisions about their automotive investments. By recognising the factors that influence depreciation and taking steps to minimise its impact, you can protect your vehicle’s value and make the most of your investment. Whether you’re buying a new vehicle, considering selling your current one, or simply aiming to maintain its value as long as possible, knowledge is power in the world of vehicle depreciation.  To keep your car in tiptop shape, also consider an AA Warranty.

Don’t forget that AA Inform is home to a range of useful tools that you can use to drive more economically. For instance, you can use our Fuel Consumption Calculator to estimate how much fuel your vehicle will use at different distances in kilometres. You can use this information to plan your trips and fuel expenses. 

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