What is Depreciation?

What is Depreciation?

Depreciation is simply the difference between the amount you spend when you buy a car and the amount you get back when you sell or trade it in. It’s often overlooked or ignored when buying a car. Take a look below for some helpful information on car depreciation you should be aware of before making your next car purchase.

Most cars lose between 50% and 60% of their value in the first three years of ownership. The rate of depreciation is dependent on a variety of factors, which fall into three categories: price, running costs and quality – both perceived and actual. By the time you’ve reached the eighth year of ownership, depreciation reaches a standstill.

Depreciation is often overlooked when buying a car, and consumers tend to focus on fuel economy instead. While economy is important, choosing a car which depreciates slowly will save you more money in the long run. According to research by CAP Automotive, depreciation will cost the typical motorist three times as much as they spend at the petrol pump. CAP Automotive say that choosing a car that holds its value well delivers much bigger savings over time than focusing on fuel efficiency.

Top 10 Cars that hold their value

In April 2015, the car valuation service Glass published a study of how well cars held their value. Here are Glass’s top ten cars for holding value, plus their average annual rate of depreciation:

  • Land Rover 20.3%
  • Tesla 28.5%
  • Maserati 29.8%
  • Audi 31.1%
  • MINI 31.3%
  • Jeep 31.7%
  • Lexus 33.0%
  • Dacia 33.6%
  • Mitsubishi 34.0%
  • Mazda 34.2%

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