The value of most commodities changes over time. It may increase in the case of some assets like land or precious metal, but it’s quite the opposite for other things like cars. Every car’s value depreciates over time but the rate of depreciation depends on many factors. This guide on car value depreciation covers everything you need to know about the phenomenon, and how to lower the hit for your car.
Why Does My Car’s Value Depreciate?
According to a survey, used car values depreciate within the first year by 20 to 30%. Several factors impact car depreciation over time – you can control some of them, but not all of them.
Here are a few factors that make the biggest difference.
Condition of your car: If you want to sell your car or want to trade-in for your next vehicle, the condition of your vehicle matters to a great extent. Maintaining your car well can save your vehicle from degradation.
If your car has proper service history, the car hasn’t been in an accident, wrecks were avoided and the interior looks good, you can maintain good value. Conversely, if there is a lot of wear and tear, the car has painted dents, and there is an accident history, you’ll make fewer dirhams on the resale.
Fuel efficiency: Some cars chug down a massive amount of fuel. In other words, these cars are not fuel-efficient, and such cars depreciate faster than the fuel-efficient ones.
Cars make and body type: The make or brand of your car and the body type also has some impact on depreciation. A car’s make and body type with higher demand in the used car market, generally have a higher resale value.
Mileage: Any car that has covered more miles will depreciate faster. Therefore, if you plan on selling your car, don’t overuse it. Opt for public transport or other options for longer journeys. Even a well-maintained car will not sell for a higher price if it has covered extensive miles.
Make and model: The make and model of your car also matters. Some car makes can retain most of the car’s value. For instance, the depreciation rate of models with regional specs, say a Japanese make is going to be lower, thanks to the high demand for such vehicles. Therefore, if you wish to resell your car at a better price, make sure you pick up a car manufacturer and model that is always high in demand.
Age: As mentioned earlier, your vehicle’s age plays a vital role in the rate of car depreciation. Cars lose around 20 to 25 % in the first few years and just about 15 to 20 % in subsequent years. Therefore, buying a slightly used car or owning a car for around 3 to 5 years before going for an upgrade will slow down the process of depreciation.
Service history: Well-maintained cars with an adequate service history usually have a higher resale value. Most buyers ask for proof of service history. Make sure you keep all the receipts of service appointments. The value of any car that is not in a good condition and hasn’t been serviced will definitely depreciate quicker.
Visual condition: The exterior and interior of your car also have a huge role to play. Always park your cars in garages or cover them, or else the UAE’s hot weather damages your car’s exterior and withers its paint away. Also, keep your clean from the inside and outside.
Renewed car insurance: Any car with expired insurance will depreciate faster and result in lower resale value. No one wants to pay more for a car if they have to buy new insurance and clear fines on it.
Always keep in mind that as a rule of thumb, the older you keep a car, the lesser you lose in value. Vehicles lose their value mostly within the first few years of purchase.
How Quickly Do Cars Depreciate?
- A new car loses its value somewhere between 9 to 11 %, the minute your drive it out of the showroom.
- After one year, the value of new depreciates by about 20% less than its original price.
- After the first year dip, car depreciation per year is around 15% every year, which means after five years, your car loses around 60% of its value.
Car Depreciation in the UAE
Whether you buy a used car or a new one, the value will depreciate. However, the rate of depreciation is the fastest in the first few years. It is why the first owner usually takes the biggest depreciation hit as compared to subsequent owners. On the other hand, one of the reasons for buying a used car is that it will depreciate at a lower rate.
The phenomenon remains the same across the world, but cars depreciate faster in countries where people do not keep the same car for too many years, such as the UAE.
Car owners in the USA, driving the same car for over 11 years, moreover, many people from other parts of the world including the UK, Australia, Africa and Asia also keep cars for longer time durations.
In the UAE, however, the general trend is to keep a car for a maximum of 5 years, contributing to faster depreciation of the car’s value.
A New Trend in the UAE Used Car Market
According to a survey, the value of used cars is rising in the UAE. The retained values of used cars are on an all-time high and jumped up from 4 to 10 percent last year. Even the used cars that are slightly expensive are selling faster than ever before. Here is a list of used cars for sale in the UAE.
The depreciation rates of used cars are also slowing down – a new trend for the UAE used car market. Experts believe used cars will depreciate slower than they did in the past, enabling car owners to lose less money at the time of resale.
Cars with Slower Depreciation and Higher Resale Value in the UAE
According to a survey conducted in the UAE car market, five cars with higher resale values include:
- Nissan Patrol. You can find these cars online, here is a list of used Nissan Patrol cars for sale.
- Honda Accord. Here is a list of second-hand Honda Accord cars in the UAE.
- Toyota Camry. You can find a listing of used Toyota Camry cars online.
- Ford Edge. You can buy used Ford Edge cars for an economical price.
- Toyota Land Cruiser. Buy used Toyota Land Cruiser SUVs here.
When thinking about what is the slowest depreciating car, several makes and many factors mentioned above play a part here. However, according to research, AudiQ5 SUV has the slowest depreciation value. The car is able to retain 72.5% of its value over a period of 3 years. You can find a line-up of slightly used AudiQ5 cars in the UAE here. For more on retaining value, read these tips to preserve your car’s value.
That is all the important information regarding car depreciation. Besides, if you’re willing to sell out your car, you can get a free valuation and sell your cars through dubizzle and get the best resale prices for your used cars.
Stay tuned for more information on car depreciation, car resale value and other important auto facts.
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