Car Depreciation

Since the day the first car showroom opened and people flocked in, to purchase their shiny automobile the saying ‘Your car loses money as soon as you drive it off the forecourt’ was birthed. Even though you may find this a little far fetched unfortunately this is true as once it is driven it becomes a used vehicle, even if you have only driven it around the block. The reason for this is because of car depreciation. A number of things affect car depreciation.

Car depreciation in a nutshell

Car depreciation is calculated by the start value of the vehicle and how much it costs when you go to sell it. The amount your car has depreciated is the amount which it has lost since you bought your vehicle.

But what does this mean when I lease a car?

Car depreciation also relates to the residual value of a vehicle which you will have heard when getting to grips with car leasing. This is what your car is worth at the end of the leasing contract with car depreciation taken into consideration.

This is how leasing monthly payments are calculated. Car depreciation is calculated by a number of things such as the amount of miles a vehicle has done, its age, general wear of the vehicle and the make, model will have an effect on how much the car depreciates.

How can I minimise car depreciating?

To stop your car depreciating quickly you can do a number of things to slow the process down a little;
• Looking after your vehicle as much as you possibly can will minimise car depreciation
• Keep it clean and tidy
• Limiting your mileage is also a great way to keep your car depreciation down as the more miles your car has the less it will be worth.
• Avoid smoking in your vehicle as the smell can be very off putting to a potential new owner and is not allowed in lease vehicles.
• Have your car serviced regularly. A car with a full service history is likely to run much better and will help you to sell it much easier as it shows that the car has been looked after.
• Make sure you look after your log book and proof of purchase also known as a V5.

Although car depreciation will have an affect on the residual value this is something which you need not to worry about if you do decide to lease a car instead of purchasing a vehicle. Another option to leasing a vehicle is to purchase a used one.

The reason many people decide to purchase a used car is because the car has usually already dropped enough in value so you can usually get a good deal on a used vehicle, however the car will still continue to depreciate in value as more miles are put onto the clock. The other downside to purchasing a used vehicle is that they will cost more money to repair and maintain than if you lease a brand new vehicle with maintenance.

The benefit of the maintenance package is that should any challenges occur with your vehicle it can be fixed without you having to foot the bill.