Depreciation is normal. You buy a new item, a couch for instance, and as time passes and use wears it down, it decreases in value. Unfortunately, there are few purchases that lose their value as quickly as new vehicles, which can depreciate by 20% or more within their first year. And with $40,000 being the average selling price of a new vehicle in Canada, that’s $8,000 worth of depreciation in the first year of ownership alone.
There are a number of factors that contribute to vehicle depreciation, mileage, fuel economy, condition, reputation and consumer preference are a few of them. Certain factors you can control to an extent, others, not so much. The following tips will help you retain the value of your car for as long as possible.
Buy used…and buy wisely
Not buying a brand new vehicle is the best way to beat depreciation. On average, new cars lose 10-11% of their value the moment they’re driven off the lot. It’s enough to turn you off car dealerships forever. After the first year, they tend to depreciate about 10% per year. One to two years old is the sweet spot when buying a vehicle.
Appraisal services, like this free tool from Carfax, will help give you an accurate read on the value of your vehicle. This will come in handy when pricing your car before putting it on the market, and give you leverage for negotiating when buying used. See our blog for more tips on what to look for when shopping for a new vehicle.
Pick a popular make, model and colour
Car depreciation is directly linked to a vehicle’s popularity. Of course, preferences change over time, but it’s still wise to invest in a make, model and colour that will age gracefully. We also recommend researching what makes and models are known for their longevity. The Canadian Black Book Best Retained Value List is a good place to start your research.
Keep mileage in mind
The average vehicle will clock 20,000 km per year. If you plan on driving significantly more than that, you can count on your resale value taking a hit. To work around this, you might consider taking other modes of transportation when possible (which will also decrease the wear and tear on your vehicle).
Keep your vehicle well maintained
Do you get dings and dents fixed? Do you keep your car in a garage? Taking good care of your vehicle will go a long way in helping retain its value. Stick to the servicing schedule recommended for your car and always keep your maintenance records — they could come in handy when it’s time to sell. If you have additional work done or add accessories to your vehicle, keep those receipts too. See our blog on performing basic car maintenance yourself for tips.
Sell before the drop
Most vehicles go through the second steepest drop in depreciation between their sixth and seventh year. This is the period when most cars need a significant amount of work done. Sell before this period to maximize your resale value (and save on costly repairs).
For more money-saving tips, visit our blog on Saving Money on Your Vehicle.