If you bought a brand new car for $35,000 today, it could be worth only about $21,000 by 2019.
It would be a loss of $14,000 in just three years, and is indicative of the biggest – and least visible – vehicle running cost: depreciation.
Also known as residuals or resale values, they’re responsible for costing you more annually than other motoring expenses such as car servicing, insurance or fuel.
Successive years of million-plus new-car sales has also reduced the market’s average resale value in recent years, according to resale specialist company Glass’s Guide.
“Overall, after three years the entire market [on average] would be sitting at around 40 to 45 percent,” says Glass’s Guide’s Nick Adamidis. “That can fluctuate wildly – by model, by segment. [The average] used to be about 50 to 53 percent years ago.
“That’s just related to the number of new vehicles being sold in the marketplace – over a million for the past six or seven years. It’s constantly putting downward pressure on the used-car market, through auction houses or dealerships.”
Buying a classic car, particularly if rare, is about the only sure-fire way to ensure a vehicle becomes an appreciating asset like a house.
Of course, cars are an emotional purchase and it’s difficult to resist the lure of shiny paintwork and that new-car smell.
And while your new car’s value will start to drop as soon as it’s driven off the dealership forecourt, there are a number of ways to at least slow the rate of its depreciation. Here’s WhichCar’s guide as to how.
10 WAYS TO LIMIT DEPRECIATION ON YOUR NEW CAR
1. Keep it tidy, clean and maintained
Keeping your new car in great condition might be obvious advice to improve its resale, yet judging by many new-ish vehicles we see on the road, it’s also obviously not always heeded. It’s difficult to avoid knocks from doors in car parks, though you can help avoid scratched wheels by parking clear of kerbs. Equally critical is maintaining an up-to-date log book to prove your car’s servicing history.
2. Limit mileage
The lower the kilometres on your car’s odometer, the higher its value is likely to be. Try to keep mileage below the 15,000km-a-year average, if possible. Glass’s Guide says luxury cars in particular can start to suffer in terms of resale once they break the 100,000km mark.
3. Opt for longer/extended warranties
Buying a car with a warranty longer than the three-year industry average will help boost its value as it provides used-car buyers with some assurance whereas they may otherwise be concerned about potential repair bills. The warranties can be either factory- or dealership-backed, though Adamidis says one tied to a specific dealership is not worth as much. Some brands offer longer-than-standard warranties. Lexus, Infiniti and Tesla offer four years, Haval, Hyundai, Isuzu, Mitsubishi, Proton and Renault five years, Citroen six years, and Kia leads the way with a seven year warranty. Lotus and Lamborghini offer just two years factory warranty.
4. Beware the options list
Glass’s Guide has a saying: “Options depreciate twice as fast as the vehicle.” Be especially wary of spending too much to add satellite navigation. It may also be a false economy to purchase the cheapest variant in a range and add some options. It’s worth considering a higher model grade, which might include those options – and be worth more come sale time, balancing out that extra initial outlay.
5. Buy popular vehicles/body styles
Small SUVs, small cars and light/city cars are among the strongest vehicle segments for resale. SUVs generally are performing well as a result of their unrelenting popularity, whether they are mainstream or luxury models. According to Glass’s Guide, the demand for the latter is affecting the residuals of prestige passenger cars negatively – particularly the large luxury sedans that continue to lose buyers to luxury SUVs.
6. Buy a rear-wheel-drive V8
The Falcon is gone but for another year or so you will still be able to buy a Commodore V8 – and resale values for models such as the SS are likely to remain strong due to a couple of factors: a) there will be demand in Australia for rear-wheel-drive V8s for at least the next five to 10 years, and b) it’s otherwise expensive to get into such a car, from the likes of the $55,000-plus Ford Mustang V8 to the $150,000 Mercedes-AMG C63.
7. Pick a good colour
Red, white, black and silver will always be “safe” colours to choose, though only distinctively trendy hues that can date quickly are likely to significantly adverse your car’s resale value. A unique colour might actually help in some cases if it was limited in production or associated with a particular performance model.
8. Buy a ‘private buyer’ car
Cars that are sold predominantly to private buyers – rather than companies, governments or fleets – typically stay out of the used car market for longer and are therefore likely to hold their value better. Popular ‘private buyer’ cars include the Mazda 3 small car and Volkswagen Passat medium car.
9. The automatic choice
Because the vast majority of Australian motorists prefer a self-shifter, there will invariably be less demand for your car if it comes with a manual gearbox. However, there can be exceptions with sports cars or performance vehicles that attract keener drivers who prefer to change gear themselves. Manual versions of V8-powered Ford Falcons and Commodores, for specific examples, can command an extra premium over auto variants. This is particularly applicable to the Ford and Holden utes, which Adamidis says are “quite rare”.
10. Hold onto it longer
Many buyers prefer to rotate their cars at least every three years, though one option is to simply own your car for as long as possible and spread the residuals loss over a number of years. Reach a decade of ownership and you will truly have got your money’s worth.
Top 10 Vehicle Resale Values in Australia*
1. VW Transporter TDI340 Crewman 74%
2. VW Multivan Executive TDI450 73%
3. Subaru XV 2.0i-S 71% (other XVs 68-70%)
4. Subaru BRZ 70%
5. Toyota LandCruiser GXL 4x4 diesel V8 69%
6. Audi RS3 67%
Subaru WRX STI Premium 67% (STI regular 66%)
Hyundai Accent SR 67% (other Accents 64-66%)
BMW M240i 67%
10. Honda Odyssey VTi-L 65% (VT-I 64%)
Other notable performers
Ford Mustang 64%
Mercedes-AMG GT S 64%
Mercedes-AMG C43 64%
Porsche Carrera 911 64%
*Source: Glass’s Guide, based on 36 months and 60,000km.
Glass’s Information Services combines data trends, market analysis and mathematical models to help predict future values of vehicles. It is the market leader in automotive residual value analysis, with over 102,000 vehicles and over one million fields of vehicle data contained in its database.
If you want to assess the approximate worth of any new car(s) you are considering, the company provides an online resale forecast tool. It allows you to select the number of years ahead as well as mileage. If you would like to know what the car you own now is worth, Glass's also offers a Current Value Certificate.