Friday, 24 August 2012

Dealing with depreciation

The depressing thing about buying a new car is depreciation. We all know that the moment a new car is driven out of a dealer’s yard it begins to drop in value.

Unless you somehow pick a future classic, the chances are that your car will keep depreciating until it is worth next to nothing. Although cars depreciate at different rates, the general rule-of-thumb is that in the first 3 years your car will depreciate around 13-15%.  After that time the depreciation slows to around 6-9%.

But there are a few simple ways to reduce your depreciation costs right from the word go.

The most obvious is to buy a second hand car, since it will lose value at a slower rate than a new car. Look for a second hand car with its warranty still valid and you'll be off to a good start.

Buying older or run-out models, demo models or leftover stock at end of year sales can get you a nice discount - even though it won't stop the depreciation, it will bring the starting value down so that the depreciation cost is not as high.

It's definitely worth remembering that some cars hold their value better than others. Look for a quality model from a respected brand - cars with good reputations have generally earned them. Cars that are known for being reliable and well-manufactured tend to depreciate at a lower rate.

Don't discount the effects of depreciation - it's your hard earned money, so spend it wisely!

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