Someone famously once said that a new car loses more than half its value the second you drive it off the dealership lot. That percentage might not strictly be true, but the sentiment is more or less accurate. It’s actually one of the main reasons why increasingly more South Africans are shopping for good quality, second hand vehicles that hold their value, instead of something shiny and new.
Do you want to find out just how quickly new cars can lose their value (and lose money)? Then stick around, because we’ve got you covered with information on what car deprecation means for you as a car owner, how quickly new cars depreciate, and which cars tend to depreciate more slowly.
Don’t forget that AA Inform is home to a range of useful tools and information – including a car depreciation calculator that you can use to check up on your car’s value.
What is depreciation?
Speaking in terms of the money, car depreciation is really just the difference between the amount of money that you pay for your car and the amount that you could get back when you sell it or trade it in.
How quickly new cars lose their value.
So, just how much money can you lose by driving off the forecourt? Is it really a hopeless case of throwing all your money away if you decide to go with a new vehicle? The truth is that while new cars lose more of their value than second hand cars, there are lots of other factors involved in the depreciation of a car. Like, for example, the car’s mileage, brand reputation of the car, and its general condition.
All of these factors contribute to the overall loss of value, so you don’t need to dismiss the notion of buying a new car based on depreciation alone.
That said, here are insights into how quickly a new car can depreciate.
1 MINUTE LATER
While it’s not as dramatic as 50%, it’s true that brand-spanking-new cars lose 9–11% in value once you’ve bought the car and driven off. Think of it this way, if you buy a car for R100 000, you’re basically throwing R10 000 out the window as you drive away.
1 YEAR LATER
Research shows that new cars suffer their biggest drop in value within the first year and after 12 months of ownership, you can expect to lose around 40% of your car’s value.
3 YEARS LATER
After three years, though, your new car will have lost 60% of its value.
Which cars depreciate more slowly (hint: it’s used cars)
Generally speaking, cars that have a good reputation for lasting a long time, are fuel efficient, and aren’t expensive to maintain are the cars that depreciate more slowly and tend to hold their value.
We can’t speak to each make and model out there, but we can point you in the direction specific categories of used vehicles, including:
- Nearly new used cars: A nearly new car is usually one to two years old, so the rate of deprecation is already slowing down, making this category better value than a car that’s straight out of the box.
- The faithful 5 year-old: This is a great category, because while 5 year–old cars don’t always come with the latest features, they won’t lose so much in value. We would just add that it’s only better value if the mileage is relatively low and to consider a warranty plan because it’s likely that a slightly older car could result in more frequent (and potentially larger) repair and maintenance bills.
- Done depreciating 8 year-olds: This is the age by which a car is usually done losing value, so in that sense, it’s not going to lose any more of its worth. But the risks will be higher, too, and it’s more likely that even just one breakdown could cost as much or more than a year’s depreciation would have done on a newer car.
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