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Why a new car loses a third of its value in a year

There’s something exciting about buying a brand new car – the smell, the spotless paintwork. Sadly though, you’ve probably never lost as much money so quickly as the moment you roll that car out of the garage showroom.

The new ‘66’ number plates launched on 1 September, and with them an industry expectation that there will a boost in new car sales. Yet, despite all the low-rate opportunities to borrow money for a car, you could be better off buying second hand. The reason? Depreciation.

What is car depreciation?

That’s not a word you’ll use very often, probably never in normal conversation, so what does it mean? Well, unless something is a collectable, pretty much everything you buy will drop in value over time – and this is called depreciation.

Your brand new car suffers from this more than almost anything else. In three years, some models could be worth 50% less than you paid, with the biggest drop happening the moment you start driving the vehicle. Typically, the value will be 15-35% less in the first year.

Considering a car could be one of the most expensive purchases you make, that’s a lot of money you’ll be losing.

It’s difficult to nail down one single factor that has the biggest affect, but the car’s reliability, colour, size, fuel economy and the number of miles you’ve driven can all make one car lose its value quicker than another.

How to beat car depreciation

If you are buying a new car, here are seven ways you can beat depreciation – or at least limit its impact.

Research before you buy

Some models will hold their value better, increasing your resale price. Look for good fuel economy and other running costs.

Buy a second hand car

A car that’s nearly new or hardly used won’t be too different to a brand spanking new one, but will be cheaper.

Chose a popular model and colour

This will really help you resell the car. A funky yellow or extra trims might look great to you, but there are probably fewer people out there looking for the same thing.

Time when you buy and sell

If you can buy when sales are slow you might be able to get a discount. Likewise, selling a convertible in the winter won’t get as much money as when the sun is shining.

Sell it before it’s replaced

New models will mean your car will drop in value, so keep an eye on motoring magazines and websites.

Take good care of your car

Again, buyers will want to know the car will keep going once they take it off your hands. Keep track of services and MOTs too.

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