Depreciation is the most significant but least understood cost of car ownership. Not as visible as petrol, servicing, registration or insurance but larger than them all, it’s only really thought about when it’s time to upgrade to a new vehicle, by which point it’s already too late and the damage has been done.
Your car’s rate of depreciation varies over time and will be different from other cars on the road. Combined with a lack of clear advice, this means that many people aren’t getting the value they could out of their existing car. To help you make a more informed choice about when it’s time to upgrade, we’ve put together this short guide to depreciation, helping you understand how fast it affects your car’s value and the uneven ways it applies to different makes and models.
Immediate & rapid depreciation
It hurts to consider, but that new car you just bought lost a significant amount of its value the second you drove it off the lot. Cars can lose as much as 17% of their value in the first year, with similar drops in the second and third year.
The result? Your car’s value could halve in just three years, meaning that your car could be worth less than the lease on it.
Cars continue to lose value beyond this point, but at a reduced rate – around 10% per year, assuming you do around 15,000 kilometres per year in it. By five years, your vehicle could be worth as little as 30% of its original sticker price, meaning an upgrade to another new car could be an expensive one.
Not all cars are created equal
However, this isn’t the whole story. Cars from different years and different manufacturers depreciate at different rates. Luxury vehicles depreciate the fastest, shedding their value faster while costing you more in depreciation each week. A tendency to resell for less than half of their original price far sooner than something like a Corolla, combined with a higher than average original price means that a $100,000 BMW could be worth $50,000 less within three years.
Additionally, there’s a simple need to account for popularity. Some cars simply hold their value longer because they’re always in demand and they’ve got a track record for reliability. Australian roads are full of Fords, Mazdas, Toyotas and Nissans – cars from brands that people trust and want to drive will depreciate far slower than those from unknown, untested or uncommon manufacturers.
All said, there’s no single equation drivers can use to figure out what exactly their car is worth – you’ll only find that out by trying to sell it.
What can you do?
Depreciation is something that every driver has to deal with. The single largest cost attached to ownership, it can cut hundreds of dollars of the value of a vehicle each and every week you hold on to it. Some dealers suggest that simply buying a popular car, keeping up on the servicing and staying accident-free are all you have to do to beat depreciation, but the unfortunate truth is that as long as you’re the owner of a car, your asset will decrease in value over time.
Carbar offers an alternative. Vehicle subscription gives you exclusive use of the car of your choice for as long as you want it. Available for one simple weekly fee bundling servicing, registration, insurance and roadside assistance, it takes away the pressure of depreciation, allowing you to simply enjoy the drive. And when you’re ready to try something new? Just let us know – change to any car in our range with just two weeks’ notice. With new model vehicles from Jeep, Jaguar, Holden and BMW, you can drive a luxury vehicle without worry about resale value.
Already got a car? Sell it to us and know you’re getting a fair price. We’ll collect the car, pay you in 24 hours and give you the freedom to drive your way.
Want to know more? We’re here to help. Call today on 1300 620 685 or send us your questions via email at hello@carbar.com.au and we’ll be happy to help. Take control of your drive and join the Carbar revolution.
