7 things that affect the value of your car

All cars fall in value fast. In fact, a brand new car typically drops in value by about 10-15% each year after you've purchased it. This unavoidable part of owning a car is known as depreciation.

Depreciation is the difference in the value of your car from the time you purchase it to the time you trade it in or sell it. It's usually expressed as a percentage, to show how much value your car has lost.

Some cars hold their value well, while others depreciate very quickly. In fact, some new cars lose nearly 60% of their value in the first three years. But by understanding the factors that affect depreciation, it can help you pick a car that will hold it's value well. You'll also then be able to take steps to help your car keep as much of its value as possible. This means you'll be in the best possible position when you eventually come to sell your car, either independently or back to the dealer.

1. Your purchase price

Unfortunately, a car depreciates in value pretty much as soon as you drive off with it.

A car dealership buys cars at a wholesale price, but to make a profit the price of their cars tends to be set higher than the price they receive from the manufacturer. This means that as soon as you get the keys to your car, it drops back to the wholesale price, so almost immediately your car is worth less than what you paid for it.

2. The reputation of your car

The manufacturer, model and year of the car all come into play. If the manufacturer has a reputation for reliable, strong, durable vehicles, this can help withstand depreciation.

Good reputation has helped cars from brands including Mini, Ford and Volkswagen hold their value well. You can expect an average depreciation of less than 50% on their cars (with an average mileage of 34,700). At the other end of the spectrum is Toyota, with their cars losing a massive 74% of their value after the same number of miles.

Best practice tip:

Stick to brands that have a strong reputation among drivers. This will go a long way to helping your car keep its value. There is a wealth of information online listing cars that hold their value well and those that depreciate quickly.

3. How many miles you’ve clocked up

Mileage is one of the biggest factors that affects the value of your car. The average annual mileage of a car is around 12,000 to 15,000 miles. Anything under is generally considered to be ‘low mileage’ and anything over ‘high mileage’. Quite simply, as you clock up miles on the road, the value of your car goes down.

Best practice tip:

Keeping an eye on your mileage by setting a daily, weekly or monthly limit will help you from drifting into high mileage territory.

4. The condition your car is in

The resale value of your car naturally depends in part on how you have taken care of it. Is there any damage to the exterior, interior or engine? If so, it will reduce your car’s value. Modifications like a new stereo or alloy wheels can also have a negative impact. Most buyers prefer unmodified cars as it makes insurance much easier.

Best practice tip:

Keep your car in good nick by avoiding damage, including bumps and scratches to the body. If you’re car does get some damage, make sure to get it fixed as soon as possible.

5. The service history of your ride

Any potential buyer will want to see your car’s service history. If you have it serviced regularly and have proof, it will help reduce depreciation and make sure you’re getting a good price for your wheels.

Best practice tip:

Make sure you get your car serviced regularly to ensure it’s in good condition and that it passes its annual MOT.

6. How many other people have been behind the wheel

Typically, the fewer owners the better when it comes to protecting the value of a car. If it’s changed hands a lot it’s likely to fetch less.

Best practice tip:

If you’re buying second hand, make sure you consult the car’s V5C logbook. This will tell you how many previous owners it’s had. If there’s no V5C logbook, it’s probably a car to avoid.

7. The market conditions

A car that is in high demand will ultimately fetch more when it comes to sell.

A lot of this depends on the car market at the time you want to sell. How desirable is your car? Has a newer model been released by the manufacturer or other cars in the same category? How strong is the economy at large? All these factors play a part in how much your car will fetch.

Even your choice of car colour can have an impact. Colours, such as white and black are always popular and so you may find these easier to sell on at a higher price.

Best practice tip:

Choosing a car that is popular in the wider market will help retain its value as it’ll still be in greater demand (no matter how much you’ve always dreamt of that pastel Mini.)