Depreciation is the decline in a car’s value over time, and can be one of the biggest hidden costs in vehicle ownership. Understanding the effects of depreciation on your car’s value is important when determining its selling price. While depreciation can be influenced by a variety of factors, it affects almost every vehicle produced.
AutoFlip has written a detailed car valuation guide that provides more information on the effects of depreciation when it comes time to sell your vehicle. If you’re ready to move your vehicle to a new home, AutoFlip’s platform is a fast and seamless way of connecting you to 1000 plus dealers across Australia, ready to buy your car now.
How does car depreciation work?
Depreciation is the decrease in value experienced by a car over its lifetime. It begins the moment the car is driven out of the dealership. It’s not unusual for brand new cars to lose 20% of their value in their first year. Depreciation continues at a steady rate over time, meaning that a car will generally be worth less the longer you own it.
Key factors influencing depreciation
There are a number of different factors that may impact how quickly your car depreciates. Some are controlled by the market, while others relate to the way the car has been used and how well it’s been looked after.
Make and model
Particular brands and models may hold their value better than others, based on the reputation for reliability and perceived quality. Vehicles from prestige brands may also suffer less depreciation as a result of their desirability.
Mileage
The amount you drive your car also has an impact on its value. Higher mileage vehicles tend to suffer more depreciation, while cars that are used less are more valuable thanks to lighter wear and tear.
Appearance
A car that looks to have been well cared for is often worth more when it comes time to sell. Ensure both the exterior and interior of your car are clean and free of small marks, dents and scratches. Consider having your car professionally detailed before the sale.
Mechanical condition
Regular maintenance is another sign that your car has been well looked after, and can make your car worth more on the second hand market. A car that comes with a complete service history is appealing to many people, and can increase your vehicle’s value.
Market demand
The condition of the market can also have an impact on your vehicle’s value. Particular market segments may fluctuate in popularity over time, with values of these cars adjusting according to buyer preferences and demand.
How depreciation affects the value of your car
While it’s important to note that car depreciation affects almost every vehicle on sale, depreciation can affect different types of vehicles in different ways.
SUVs, utes and sedans may experience lighter value loss thanks to their versatility and consistent appeal.
Luxury cars and electric vehicles often plummet in value quickly, due to their higher purchase prices and technology that becomes outdated in just a few years.
Some classic cars can even appreciate in value, being worth more than their original purchase price by virtue of their rarity and desirability. Generally, however, these cars must depreciate in value first, before becoming more valuable.
Calculating car depreciation
Calculating your vehicle’s predicted depreciation can be a smart financial decision, giving you more of an idea of what your car will be worth when you come to sell it. There are dedicated online tools that estimate the selling price of cars according to their make and model. However, as a guide, consider the examples below.
A small sedan that costs $25,000 brand new and is driven for five years should experience depreciation of around 15% per year. The sedan will lose around $14,000 over this time, and be worth $11,000 when it comes time to sell.
Depreciation may impact an electric vehicle that costs $60,000 more harshly. You can expect to lose around 20% per year on this vehicle, meaning the vehicle would lose around $46,000 over the 5 years, equating to a market value of $14,000.
So how should I price my vehicle based on what I know about car depreciation?
When you are determining a price for your vehicle, you should be guided by data rather than emotion. Consult various car selling price guides for your make and model of vehicle to understand the current market demand for your car.
Listing your car with AutoFlip means you access 1000+ dealers ready to make a serious offer on your car now. The final sale price of your car is determined by the highest offer received via a competitive bidding process. The price will depend on your car’s condition, its unique features and the current market demand.
We tap into our extensive network of trusted and licensed buyers across Australia and negotiate the best price for your car on your behalf. When you’re ready to sell, simply enter your car details and experience the quick and hassle-free way to sell your car.
