Tips to Reduce Car Depreciation
Unfortunately, there is no way possible to avoid car depreciation when you buy a car. The reality is that all cars depreciate and you can expect brand new cars to depreciate by 20-30% in the first year of ownership alone. That is a staggering number and means a $25,000 car could cost you $5,000 in depreciation alone in just one year! Luckily, there are things you can do to reduce your car’s depreciation, potentially saving you thousands of dollars. In this article, we’re going to give you 5 tips to reduce your car’s depreciation rate.
1. Buy a make/model that depreciates slowly.
Not all cars depreciate at the same rate. In fact, some cars depreciate significantly faster than others. According to a report done in 2020 by I See Cars, the BMW 7 Series was the fastest depreciating car, while the Jeep Wrangler Unlimited depreciated the slowest. So when you’re researching the next car you want to buy, do your research and see what makes and models depreciate the slowest, and aim to buy one of those cars.
2. Buy a used car.
New cars depreciate up to 30% in their first year of ownership. Enough said. Do you really want to spend 30% of your car’s total value in the first year? Probably not. The best way to avoid this is to simply buy a used car. You may make the assumption that a used car won’t be as reliable or have the newest technology, but this doesn’t need to be the case. If you can buy a one to three-year-old car from a dealership, it’s safe to assume it’s been thoroughly inspected and will also likely still have its original warranty. You can also use Carfax and get a full vehicle report to see if the car has been in any accidents or needed major repairs. On the technology side, typically there isn’t a massive difference in the technology between a few years of a particular model unless we’re talking about Elon Musk’s new Teslas.
3. Don’t go crazy with customizations.
Even though you may love the idea of a hot pink Honda Civic with a high spoiler. It’s going to significantly decrease the value of the vehicle. Not only are you going to spend money making these additions, but it’s going to cost you when you want to sell the vehicle. The reason being is that not many people are going to want to buy a customized hot pink Civic with a spoiler. Your best bet is to stick to more traditional colours and avoiding any crazy customizations.
4. Buy an extended warranty and keep up with maintenance.
This is a two-part tip but could make a significant difference in your car’s depreciation rate. While an extended warranty will cost you more when you buy a car, it could save you thousands of dollars in repair costs down the road. Extended warranties are also transferable so if you decide to sell the car the future owner will be at ease knowing he/she is covered. This will ultimately increase the value of your vehicle. If you really want to keep your car’s value high and keep your vehicle in good shape make sure you keep up with the vehicle’s maintenance. Whether this means getting oil changes regularly or taking the car to the shop the moment the engine light comes on, staying on top of these things will increase the vehicle’s longevity and value.
5. Consider the amount of mileage you’re putting on the vehicle.
One of the biggest contributing factors of depreciation is the amount of mileage on the vehicle. On average, most Canadians drive their car 20,000km per year. If you drive your vehicle any more than this, expect your car to depreciate much faster. If you’re intending to sell your vehicle after x amount of years, it’s important to consider this and take other means of transportation if it means keeping your vehicle under the annual 20,000km mark.
Bonus tip: Sell at the right time!
If you can sell your vehicle at the right time, you might be able to get more money for it. For example, in Canada we have about 3, maybe 4 months where you can comfortably drive in a convertible with the top down. For this reason, the spring would be a great time to put your convertible sports car on the market just in time for the hot weather. On the other hand, your all-wheel-drive SUV or truck will most likely be a hotter commodity in the fall before the dreaded winter roads return.
Looking to Buy a Used Car?
If you want to reduce depreciation and buy a used car, there’s no better place to go than Car Loans Canada. Fill out our short application and get connected with one of our many dealers across Canada!
