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Car depreciation not given consideration by a third of buyers

A third of UK drivers from a survey of 2000 admitted to not considering depreciation when buying a car, despite saying they had a full understanding of it.

by Andrew Segal 3rd October 2017

The survey also found that 11% of drivers believe that all cars depreciate at the same rate, with 22% saying this in the under 34s age group. The reality is that cars hold and lose their value differently, depending on make, model, colour and other factors too. A small bit of research in advance of making a purchase can be the difference between owning a white elephant and a rare Porsche 911.

43% of under 34s also didn’t know that if a car is written off after 18 months after being bought, the insurance company will only pay the car’s current market value, not what was paid for it when new. This is despite having fully comprehensive insurance cover.

Ben Wooltorton, a director here at InsuretheGap, says: “Most cars typically lose the largest percentage of value in the first couple of years after purchase. Unfortunately, many people don’t realise that this reduction will affect the amount of money an insurance company pays out following their car being written off or stolen.

“If an accident occurs involving a new car that’s two years old for example, an insurer will pay out to the reduced current market value, rather than the original cost. This could leave consumers owing money on finance for a car that no longer exists.”

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Top Ten Tips on Car Depreciation

There are a number of factors that determine the rate of depreciation for vehicles and these can be separated into two groups: the actual value of the car and the perceived value of the car.

Actual Depreciation – these factors affect the value of each and every vehicle regardless of the make and model and include:

  1. Mileage – the average mileage is around 10,000 per year. The more miles on the clock, the less the car is worth.
  2. Ownership – The more owners a car has, the less it will be worth.
  3. Service History & General condition – a full service history from a manufacturer, approved garage or dealership helps to maintain a car’s value.
  4. Colour – Black, purple, white and silver are the best colours for holding value, whilst gold, green, maroon and turquoise are the worst.
  5. Desirability – the rarer or more sought after the vehicle is, the more residual value it will hold.

Perceived Depreciation – these factors can have varying effects on a vehicle’s value depending on its make and model and the requirements of potential buyers and include:

  1. Economy – cars with greater fuel efficiency are more desirable and therefore tend to hold their value better.
  2. Vehicle Tax – potential buyers looking to run their vehicle on a budget may be put off by high vehicle tax.
  3. Reliability – mechanically reliable cars are more in demand because they cost less for upkeep in the long term.
  4. Warranty Length – a long manufacturer’s warranty will attract a higher resale value.
  5. Size – bigger cars tend to depreciate more quickly due to higher running costs.

Auto Express unveiled the below list of the UK’s Top 10 best depreciators – the cars on sale now that will hold their value best. The list is compiled using the latest information from CAP, and are based on predicted residual values as a percentage of the new price at three years/30,000 miles.

  1. Ferrari 458
  2. Porsche Macan
  3. Lamborghini Aventador
  4. Porsche 911
  5. Range Rover
  6. Lexus NX
  7. Range Rover Sport
  8. Mercedes GLA
  9. Audi A1
  10. Aston Martin V8 Vantage