12 ways to reduce your car’s depreciation

Depreciation is one of the biggest costs of car ownership — especially if you buy a new car. In fact, most new cars lose 20% of their value the second they’re driven off the lot. Though unavoidable, there are ways you can limit this financial loss — from buying a car that maintains its value to keeping up with maintenance. Keep reading to learn 12 tips for reducing your car’s depreciation.

What is car depreciation?

Car depreciation is the rate that a vehicle’s value goes down over time. Several factors contribute to depreciation, like wear and tear on the vehicle over time and outdated features. For example, a vehicle that’s worth $27,705 when it’s brand new might only be worth $9,625 after five years. Keep in mind that every vehicle depreciates at a different rate, so you’ll need to do some research to find out how much your car is worth. Read our full guide on how to figure out your car’s value here to learn more.

5 tips to reduce depreciation before you buy

The initial depreciation you face when you drive a new car off the lot is unavoidable. But there are a few ways to make that hit a little less painful.

1. Choose the right make and model

   Pick a model that maintains its value. This typically includes cars that have good fuel economy, low running costs and a reputation for reliability. Manufacturers that regularly receive awards from companies like J.D. Power will tend to have a lower rate of depreciation because they can boast a track record of quality. The same can be said for vehicles with high safety ratings.

   This will help you get a better deal when you go to sell or trade in your car down the road.

2. Research previous resale values

   Want to know how much a car will be worth in three or five years? Do your research before you visit the dealership. You can find resale values of models from previous years on sites like Canadian Black Book and Auto Trader Canada to give you an idea of what different models might be worth in the future. Canadian Black Book also publishes an awards list every year of vehicles that retained the most value over the last 4 years. This can also help you find a car that depreciates at a slow rate.

3. Pick a standard color

   Did you know the color of your car can impact how fast it depreciates? White, black, silver and gray cars remain popular and are better at maintaining value. On the same note, you might find it harder to find a buyer for your fluorescent orange dream car. Keep this in mind if you’re ever toying with the idea of buying a vehicle — or painting the one you currently have — a bold color.

4. Buy used or lease

   Buying a slightly used vehicle, even if it’s just a year old, can help you avoid some of the costs of depreciation. That’s because a new vehicle can lose up to 30% of its value by the end of the first year after you buy it. Buying a slightly used car means that you let the previous owner soak up most of those depreciation costs, which reduces the amount you lose in value.

   Leasing also includes the cost of depreciation, and you may be able to get a good deal if the car’s actual resale value is higher than the buyout price at the end of your lease. Find out if leasing or buying a car is right for you.

5. Opt for a car that comes with a transferable warranty

   While most new cars come with a warranty, picking a manufacturer that allows you to transfer your warranty to a new owner can help increase its resale value — and reduce depreciation.

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5 tips to reduce depreciation after you buy

These tips can help ensure your car maintains its value for the long haul. This is especially important if you plan on selling your car or trading it in down the road.

1. Drive safely

   Accidents — especially major ones — can lead to repairs that speed up depreciation. Plus, any accidents or repairs reported to your insurance company will be added to your vehicle’s history report. This can also reduce the value of your car and make it harder to sell.

2. Stay on top of maintenance

   Used car buyers want to purchase a reliable vehicle, not one that’s been neglected or driven almost to the breaking point. Get your car serviced at the manufacturer’s recommended service intervals and keep the receipts. Having a full record of previous maintenance makes your car that much more valuable — and its depreciation that much less costly.

3. Keep the kilometres down

   The more a car is driven, the higher the chance that something may go wrong. By keeping your kilometres as low as possible, you can minimize the effect of depreciation. A maxed-out odometer can have a huge impact on your car’s resale value.

4. Keep it clean

   From regular vacuuming to the liberal use of scented fabric spray, keeping your car clean and fresh is essential to reducing its depreciation. You’ll also help your resale value if you avoid smoking, eating and drinking in your car. Frequent trips to the car wash can also pay off. So can parking in a garage or covered area.

5. Avoid nonstandard modifications

   Thinking of turbocharging your engine or taking up all your trunk space with the most elaborate sound system known to man? It may actually reduce your car’s value and make it less attractive to prospective buyers. Keep nonstandard modifications to the minimum to ensure your car doesn’t depreciate solely because of your personal preferences.

2 tips to reduce depreciation when you’re ready to sell

Here are 2 pointers to get the best price when you’re ready to upgrade your car to something new:

1. Sell at the right time

   Gauge the market before selling your car. For example, you’ll probably get less for a convertible if you decide to sell during the winter. And if your car’s manufacturer just updated or discontinued your car model, the resale value could go down.

2. Find a private buyer

   While selling or trading in your vehicle at the dealership is usually the fastest way to get rid of your car, it tends to come with a lower price than if you were to sell privately. Just be prepared for it to take a bit longer — especially if you’re hoping to sell it for as high a price as possible.

Bottom line

By shopping smart and keeping up with maintenance, you can prevent some of the loss caused by depreciation. And if you’re ready to buy, you can lower your costs by comparing car loans and searching for a competitive interest rate.

Frequently asked questions reducing car depreciation

• Will a leased car depreciate in value?

  Yes. Just like a new car you buy outright, a leased car loses its value to depreciation the more you drive it. This is part of what you pay for when you sign a lease contract, so keep an eye out for language that over- or underestimates the amount of depreciation that may take place over your lease term.

• How fast do cars depreciate?

  New cars depreciate as soon as they’re driven off the lot. And over the first few years of ownership, a car may lose up to 40% of its overall value to depreciation. But after the fifth year, depreciation evens out. The exact loss depends on the model, maintenance and mileage.

• Which cars depreciate the least?

  Toyotas and Jeeps are just some of the models that hold their value better than others.