Car depreciation is the difference between the original value of your car and its current market value. As new cars age, their value decreases, making it important to understand the impact of depreciation when buying, selling, or insuring a car.
This guide from Auto Trader covers various aspects of car depreciation, including calculation methods, rates, and its impact on insurance.
How much is my car actually worth?
To accurately determine the worth of your car, consider getting a free car valuation. Auto Trader’s valuations tool provides a real-time estimate of your car’s value based on factors like age, mileage, factory spec, and optional extras, ensuring an up-to-date and accurate valuation.
The process is quick, easy, and completely free.
Why do cars depreciate in value?
Cars depreciate due to factors such as wear and tear, mileage, accidents, advancing technology, market demand, and economic conditions. Manufacturer reputation, model year, and maintenance history also affect resale value. While depreciation is inevitable, regular maintenance and careful driving can slow the process.
What is the depreciation rate of a car?
New cars can lose 20 to 30 percent of their value in the first year, and around 15 percent for the next couple of years, resulting in a total depreciation of 50 percent or more over three years. However, the depreciation rate can vary based on factors like make and model, age, mileage, and market demand.
Do cars go up in value?
Historically, cars depreciate over time, but factors like inflation, interest rates, and supply and demand can cause some cars, especially rare or limited edition models, to increase in value. Premium brands often create exclusivity to maintain or increase values.
How fast do electric cars depreciate?
Electric cars depreciate differently from traditional vehicles and factors like battery health, technology, brand popularity, and charging infrastructure affect their value.
How does car depreciation affect insurance?
In the event of a total loss, insurance companies typically pay the actual cash value (ACV) of the car, which accounts for depreciation. Those paying for a car on finance may need additional coverage or gap insurance to cover the remaining loan balance.
What factors contribute to depreciation?
- Mileage
- Number of previous owners
- Brand reputation and reliability
- Size, cost, and fuel economy
- CO2 emissions
How to slow your car’s depreciation rate
- Maintain a full MOT and service history
- Keep the car clean and well-maintained
- Address repairs promptly
- Minimize mileage and avoid modifications