Vehicle Depreciation – 4 Effortless Tips To Reduce Depreciation

Introduction

Depreication is unavoidable. One thing you should know about a car is it’s a commodity – not an investment. While real estate and gold are likely to increase with time and double on your purchase at the time of exchange, cars will depreciate the moment you drive them off from the showroom. However, unavoidable things do not always have a time constraint. One cannot avoid death, but can work their ways towards a longer life by maintaining their lifestyle.

Typically, the value of a car depreciates 20 every year. There are several reasons why the vehicle depreciation weighs larger on the usable commodity scale. However, vehicle depreciation can also be delayed by helping it maintain a healthy lifestyle.

If the car is used for business purposes you can claim depreciation on the car as an expense, otherwise, if you are stuck with a car you will likely trade in low depending on the model, mileage, and condition of the car at the time of a trade-in. The first year from the time you took the car home, your car is likely to depreciate 20% to 30% of its value and then the percentage decrease ranges from 15% to 18% from years two to six.

Because cars can wear and tear with time and usage, they lose their value when they are kept on display again in the market for a new owner. The repairs are added on top of the mileage if you are looking to sell a car. So far, Mitsubishi Mirage is known to lose a whopping 58% of its value over five years, followed by Chevrolet Sonic and Volkswagen Jetta with 56.5%.

However, looking on the bright side, cars like Kia Rio, Mazda 3, GMC Canyon, Honda Civic, and a few others are known to retain about 85% of their value over 5 years. And if you are looking for a car that will benefit you in the long run, you will need to know how depreciation works so that you are getting better deals and even profit out of it. Known that trucks, SUVs, and sports models retain the most value while luxury sedans depreciate higher and faster.

Also, you can get some tax benefits on the car by showing depreciation as an expense. Put simply, anything that loses its value over time is called depreciation including car components such as rubber, plastic, nylon parts, batteries, airbags, and paint subject to wear and tear.

4 Factors Affecting The Vehicle Depreciation

As mentioned above, vehicle depreciation is calculated on anything likely to have no value with time and usage, like a vehicle depreciation where the value of a car depreciates 20 every year.

According To IRDAI, the depreciation rate for 0- 6 month old cars is 5%. For 6 months – 1 year old car, the rate is 15%. For 1-2 year old car, the depreciation rate is 20% For 2-3 year old car, the rate is 30% Likewise, if the age of car is 3-4 years, the rate of depreciation is 40%, and so on.

If the vehicle depreciation only ages with time, so what are the components in a car that can depreciate with time and make your car sell for a lower price and how can you reverse the aeging?

Here we have compiled a few key components that are subject to aeging a vehicle depreciation and how you can take care of your car to bring up the value of your car without having to lose a lot in the trade-in or eventually sell it at a scrap yard without zero profit.

Mileage

Mileage is the number one factors that determines that vehicle depreciation rate. Mileage is the total number of kilometers the car has traveled since the beginning of its purchase. The more the mileage, the more the depreciation. This is because mileage determines the usage of the car along with the probability of its wear and tear with heavy usage.

The more the car has traveled, the more it is likely to have used up the features, like the battery or other components that are high-end on the cost sheet. But one can avoid this if he or she can provide the service proof of the car that they have been up to date on the servicing of the car. This will ensure that the car is being taken care of and is being regularly serviced to reduce the wear and tear of the car, by keeping it clean and maintained.

Make And Model

You must have read the part where we discussed how luxury sedans depreciate faster and higher compared to SUVs, trucks, and sports models. This is because of their market value and the capability of the car in the long run. Also, you should remember that the reputation of the car manufacturer, brand history, and market events affect the depreciation rate. Put simply, your make and model affects vehicle depreciation rate as it determines the resistance of the car to its wear and tear. This can be wind resistance, terrain usage, repair expense, cost of maintenance, and more.

Type Of Fuel

It is no surprise that when it comes to fuel, electric and hybrid vehicles are what depreciate slower. This is because of their fuel efficiency and easy maintenance. Fuel is what comes under monitoring expenses, along with road tax, running costs, maintenance, etc,… The cheaper the fuel, the lesser the depreciation added to your vehicle over time. Therefore if you compare petrol against diesel in India, diesel will win the race on curbing depreciation. With this in mind, it is therefore advisable for the buyer to factor the vehicle depreciation along with tax, insurance, financing, or other add-ons.

Condition Of The Vehicle

Whether you have used the car more than you should or less than you should, you cannot negotiate with the buyer if your car is in the worst condition. Imagine that you are buying yourself, and you are low on budget. While it is tempting to get a top model in the budget you like, would you want to buy a car that looks like you have to push it to make a move?

This is the reason why the condition or state of the vehicle is the most important part of a trade-in. Scratches, worn tires, dents, cracked glass, or even malfunctioning features will get you a higher depreciation on the car. And this is why servicing is important for the car every 6 months or so, depending on the usage. If you are using it more, get it serviced once in 3 months to avoid the consequences of vehicle depreciation and minimizing the rate at which the motor vehicle depreciates. This will ensure that your car will sell like a hot cake in the market when you trade in for a better model.

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The Bottom Line

Vehicle depreciation is as high as it goes if neglected. This is especially important in the long run when you are selling your vehicle. In the beginning, your dreams might cloud everything else around the car. But the profit and loss are what’s more important to your financial health. And if you want to get better deals and if you are someone counting the worth of every penny, then you will have to make sure that your pennies are accounted for and you are being careful with your pockets being robbed.

If you are still unsure how, give us a call at Blue Carz and schedule a free consultation with our representative, who will take you through the entire process of availing of a loan on your vehicle without having to break the bank.