When buying a new car, depreciation is an inevitable factor that impacts its value. In South Africa, a car loses about 10% of its value the moment it leaves the showroom. Over time, this depreciation continues, influenced by various factors such as age, mileage, and transaction costs.

Source

Factors Influencing Depreciation

  1. Age and Mileage: The car’s age and the distance it has traveled are major contributors to its depreciation. Older cars with higher mileage generally have lower resale values.
  2. Transaction Costs: The difference between the trade-in price (what a dealer offers you) and the retail price (what you pay) adds another layer to depreciation, often around 10%.
  3. Residual Value: A car’s residual value is its worth after a certain period. This is influenced by its original price, brand reputation, and model demand. Affordable cars, in-demand models, and brands with strong reputations like Toyota tend to depreciate slower.

Tips to Minimize Depreciation

  1. Choose Wisely: Selecting a car with a strong residual value, often linked to affordability, brand reputation, and demand, can help mitigate depreciation.
  2. Fuel Economy: Cars known for fuel efficiency tend to hold their value better due to higher demand.
  3. Smart Purchasing: Avoid overpaying by comparing prices of slightly used models and ensure the quality and condition of any used car you purchase.
  4. Maintenance: Regular maintenance and keeping mileage low can preserve a car’s value. Ensuring the car is in good mechanical condition is crucial for a better resale price.

Conclusion

While car depreciation is unavoidable, making informed choices about the car’s make, model, and purchase price can help limit its impact. By maintaining the vehicle and choosing wisely, you can retain as much value as possible over time.