Your car’s resale value: why it decreases and how to prevent it

If you’re a car owner, you’ve likely noticed your car’s value drop over time. This decrease, known as depreciation, impacts all vehicles, from luxury cars to everyday models.

Understanding why your car’s value drops will help you slow down depreciation on your car so you can get the most out of it when you sell or trade your car.

Why does your car’s value drop?

As soon as you buy a car and drive it out of the dealership, it starts dropping in value. But whether your car depreciates faster or slower depends on a few things. Let’s take a look at the most common factors.

1. Your car’s age

Cars lose the most value in the first year of ownership. On average, a new car loses 15-20% of its value in the first year, and this continues to drop over time. Some models depreciate faster than others but by the fifth year, most cars had lost 50-60% of their purchase price.

2. Wear and tear

Regular use causes damage to both the inside and outside of the car. Scratches, dents, and worn-out seats lower the car’s resale value. Accidents and bad maintenance also lead to faster depreciation.

3. Car market trends

Buyers’ wants and needs change over time. Fuel-efficient cars often hold their value better due to rising fuel costs, while large petrol-powered cars depreciate faster. The rise in electric and hybrid cars may also impact depreciation rates.

4. Luxury cars vs. standard models

Luxury cars may have high-end features, but they tend to lose value faster than affordable models. This is because they cost more to maintain and have a smaller second-hand market. Standard, reliable cars tend to keep their value for longer.

5. Your odometer reading

A car with a lower odometer reading will sell for more, as a well-maintained, lower-mileage car is often more attractive to buyers than a newer one with lots of kilometres on it. In short, the more you drive, the more your car’s value drops.

6. New model releases

Buyers typically want the latest technology and features. This means that when a new version of a car model is released, older models tend to lose their value faster.

How to slow down the rate of depreciation

While depreciation is unavoidable, there are some ways to slow it down. Let’s unpack this.

1. Maintain a full-service history

A car with a full-service history shows that it’s been well cared for. This is attractive to buyers, so remember to keep all your service paperwork and receipts. Regular servicing will also help prevent small issues from becoming time-consuming and expensive repairs.

2. Buy a year-old car

Year-old cars have already lost most of their value in the first year. Buying a car between one and two years old can save you a lot of money while you’ll still get a fairly new car. And if you buy it from a certified pre-owned car dealership, you’ll be able to benefit from the warranty, too.

3. Choose popular models

Cars that depreciate slower are in high demand. Before buying a car, research which models hold their value best. Reliable brands with affordable maintenance costs tend to have a better resale value.

4. Keep your odometer reading low

Drive only when you need to. A lower odometer reading helps your car keep its value. If you have a few cars, switching between them can help spread the mileage and slow depreciation.

5. Protect your asset

Regularly clean your car, wax it, and try not to expose it to extreme weather. Using seat covers and floor mats can help protect the inside against wear and stains.

6. Avoid unnecessary changes

Custom rims, body kits, and performance upgrades may look appealing to you, but they often lower the car’s resale value, as most buyers prefer factory specifications. Keeping the car as original as possible is wise.

7. Choose the right time to sell

The car market is always changing. Selling your car when demand is high (for example, before a new model is released) can help you get a better price. Additionally, cars tend to sell better in summer when more people are shopping for vehicles.

8. Comprehensive insurance is best

Damage to your car reduces your car’s value by a lot. To protect your investment, make sure you have sufficient car coverage. Comprehensive car insurance covers damage to your car caused by events like accidents, theft, fire, natural disasters, or vandalism – even if the incident isn’t your fault.

It’s the most complete type of cover, offering peace of mind and better financial protection when unexpected things happen. Plus, it can help you avoid unexpected costs when your car needs mechanical repairs or bodywork.

If you’re looking for affordable, comprehensive car insurance in South Africa, you can get your quote online in just a few minutes!

The best decision for you

Even though your car’s value drop slows over time, taking care of it and selling it at the right time can help you get the best price. Whether you’re buying or selling, understanding how car depreciation works will help you make the best decision for your pocket.

Disclaimer

The article gives South African motorists general information on why cars’ resale value decreases over time and how to slow down this process. However, it’s important to always do your own independent research.

Get a quote for affordable Comprehensive car insurance from Prime South Africa and enjoy fixed premiums, reducing excess, and top-tier service. T&Cs apply.

Make sure to always get professional financial advice from a certified financial advisor to help you choose the most appropriate financial services product.