South Africans spend a lot of time behind the steering wheel, crisscrossing this beautiful country as they explore along its highways and byways and off the beaten track. Inevitably this means that the kilometres quickly add up and this slowly chips away at the value of your vehicle… a process known as depreciation.
In a nutshell, vehicle depreciation is the rate at which your vehicle loses its value over time, starting from the moment you buy it. It’s an inevitable process that affects all vehicles, regardless of make, model, or age.
The harsh reality of the matter is that your new vehicle will start losing value the minute you drive it off the showroom floor! The biggest drop in value occurs within the first year, when you can expect to lose between 9-12%. After 12 months of ownership, you can expect to lose around 40% in value. After three years, the vehicle will have lost 60% of its value.
To calculate how much your vehicle will depreciate over a set period of time, you would need to determine the residual value of a car, which is influenced by make, model, age, mileage, and other factors. The realistic value is linked to numerous vehicle-specific factors, such as equipment, colour, service history, condition.
Another helpful hint is to look at the prices of one-year-old models of the vehicle you are looking at buying. This will give you a fair idea of how much value that model might lose.
You can’t stop depreciation, but you can make careful upfront choices, and you can slow it down. There are several factors that influence a vehicle’s depreciation rate. These include:
- Mileage: The more you drive, the faster your car depreciates.
- Condition: Maintaining your vehicle in good condition can slow depreciation, while neglect can hasten it.
- Market trends: Shifts in consumer preferences and new technological advancements can make older models less desirable, which reduces their perceived value.
- Vehicle type: A 4×4 bakkie, for instance, may have a different depreciation life compared to sedans or electric vehicles.
Used vehicles depreciate less. If, for instance, you buy a vehicle that is one year old, you only suffer half the depreciation the first owner did.
However, even if you’re buying a pre-owned vehicle, it is wise to compare prices. If you pay above the market price, you won’t recover the difference. With a used car you also need to pay attention to quality and condition; try to find the lowest-mileage vehicle in top condition and buy from a reputable dealer.
Lastly, you want to make sure that your vehicle retains as much of its value as possible by keeping up with its service and maintenance schedule. Limit the mileage as much as possible (yes, when know that’s difficult if you’re into overlanding!) and be weary of picking up scratches and dents (even if you are off-roading). It’s a simple truth that a vehicle with above-average wear is less desirable in the used market, and mechanically unsound cars are a definite no-no.
