There's an old adage that says, the worst thing you can do to a new car is drive it off the lot. That's because a new car begins to depreciate the moment it rolls out of the showroom and onto the open road.
A family car purchased new will on average depreciate 10 to 20 percent in its first year. Which on a typical $30,000 people mover could mean as much as $6,000 in lost resale value.
There are, however, some things you can do to reduce the extent to which your new car depreciates, both in its first year and in the years that follow. In this article we will explain what you can do before and after you buy your new car to minimise depreciation and maximise resale value.
1. Choose the right badge and options
The first step in maximising your car's resale value is choosing the right car with the right extras.
The Japanese staples Toyota, Subaru, and Mazda, all have a reputation for reliability. The Toyota Hilux, in particular, is renowned for surviving just about anything. That reputation means a better resale value as consumers look to invest in a used car that will stand the test of time.
Similarly, choosing the right options can make a significant difference to your car's resale value. Bluetooth, satellite navigation, rear-view cameras and extra safety features are highly desirable to drivers and are increasingly becoming available in lower-end models,
There are no shortage of used cars out there. If your car doesn't have the badge and features which shoppers are looking for, they are likely to go elsewhere. Choosing the right options before you buy can make a big difference when you sell.
City Car: Nissan Micra ST
Purchase Price |
$13,490 |
3 year depreciation |
$4452 |
Redbook resale (%) |
67.0 |
Warranty (years) |
3 |
2. Choose your car's colour and styling wisely
It may be tempting to buy a car in your favourite colour. However, unless you're fond of conservative tones it may pay to think twice. Flamboyant colours can reduce the amount drivers are willing to pay. Selected colours too, like purple and hot pink, can wipe hundreds from your car's resale value.
A spoiler or sunroof can boost the look and feel of your car, but that may not translate to resale dollars. You could potentially spend thousands on vehicle trimmings and not see an extra cent in resale value. Style is often subjective and while you may appreciate the added extras, they could deter potential buyers.
Street modifications such as performance exhausts, lowered suspension, and the like should be avoided.
Light car under 17k: Mazda 2 Neo
Purchase Price |
$14,990 |
3 year depreciation |
$3148 |
Redbook resale (%) |
79.0 |
Warranty (years) |
3 |
Source: whichcar.com.au
3. Consider a second-hand car
According to data from automotive website edmunds.com, cars depreciate the fastest during their first year on the road. In fact, edmunds go so far as to claim that some vehicles will depreciate more in their first year than in the following three years combined.
What does this mean for car buyers? It means that you can save a sizeable amount by choosing a second-hand car. By buying a car that is a year or two old, you can avoid that initial and significant drop in value.
The downside, of course, is that you won't get that new car smell. And, because the car is second-hand there is likely to be some wear and tear. But, at two or three years old, it is likely the car will still be under warranty should any mechanical problems arise.
Edmunds do advise, however, that cars see a second sharp drop in value after around five years on the road. So, if you're looking to sell within three to four years, a used car of this age may not be a suitable choice.
Light car under 25k: Volkswagen Polo 81TSI Comfortline
Purchase Price |
$18,590 |
3 year depreciation |
$6395 |
Redbook resale (%) |
65.6 |
Warranty (years) |
3 |
Source: whichcar.com.au
4. Ensure that your car is maintained properly
Having your car serviced regularly as per the manufacturer's instructions is vital for maximising resale value. A complete and up-to-date service history is the best indication that the vehicle has been properly maintained and cared for; therefore, it is something potential buyers will look for.
Sun and dust can cause visible wear and tear to your car's paint and interior. If possible, keep your car in a carport or garage, as this will help to reduce the impact of the elements. Regular cleaning and occasional waxing of the paint too, can help to keep your car looking its best.
Small damage such as dents, chips and scratches can all deter buyers. So, make sure minor blemishes are attended to either immediately or at least prior to putting the car on the market. Paying for a small repair could add hundreds to your car's resale value.
Smoking in your car should be avoided and not just for your health. Many buyers will not even consider a car that has been smoked in. Animal hair too, can be difficult to remove, even with an industrial strength vaccuum.
Small car under 25k: Kia Cerato S
Purchase Price |
$19,990 |
3 year depreciation |
$8596 |
Redbook resale (%) |
57.0 |
Warranty (years) |
7 |
Source: whichcar.com.au
5. Get your car ready to sell
This one is a no-brainer. When it's time to sell, make sure you put your best foot forward. A clean and polish can do wonders for enticing buyers and maximising your car's resale value.
Independent wholesaler Craig Moore said in a recent news.com.au article, "Spending $150 on getting the car professionally detailed and steam-cleaned can add up to $1000 to the selling price of a vehicle. That’s the best money you can spend when selling a car.”
Replacing any worn components such as tyres, engine oil, or batteries is also a must. You want to show buyers that your car has been cared for and that potential for automotive problems is minimal. A bit of cleaning and maintenance can demonstrate this in spades.
Small car under 25k: Hyundai i30 Active
Purchase Price |
$25,890 |
3 year depreciation |
$11,029 |
Redbook resale (%) |
57.4 |
Warranty (years) |
5 |
Source: whichcar.com.au
6. Sell at the right time
If you have a good car and you're asking an appropriate amount, chances are your car will sell any time. However, selling may be more difficult during the holiday months, including December, January and April. People often have additional commitments at this time of year and will put off car-shopping until a quieter period.
If possible, arrange to sell your car while it's still under warranty and before the clock hits 100,000km. This will give buyers more confidence in the security of your vehicle.
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