Depreciation and Second-Hand Car Sales

Are you planning to buy a second-hand car at some point in the near future? If so, how much thought will you put into the idea of depreciation? Second-hand cars obviously cost less than their newer counterparts because they have lost some value over time. Yet how much value they lose is necessarily measurable by easily quantifiable things such as mechanical condition. Car depreciation is largely a supply-and-demand sort of thing.

Car makers settle on retail prices only after looking at huge data sets measuring everything from customer demand to market performance. Neither buyers or sellers of second-hand cars go through nearly as much work. Second-hand sale prices rely mostly on what the market will bear at the time of the potential sale.

For example, you could be in the market for a used Audi A3 somewhere in the north of England. Meanwhile, another car buyer in the south of England is looking for the exact same car. Chances are you will pay less than your counterpart due to supply and demand. In a nutshell, there are more people in the south of England after an Audi A3.

It is About Buyer Perception

It is easy to fall into the trap of believing that the most mechanically-sound cars are always subject to the least amount of depreciation. But it is not true. Car depreciation is more about buyer perception than anything else. It has very little to do with mechanical integrity, fuel efficiency, insurance costs, ECU remapping, or anything else.

If a buyer perceives a car to be more valuable, he or she will pay more for it. Conversely, someone looking to buy a second-hand car on a limited budget is unlikely to place a high value on any car. The perception factor is so strong that car makers invest a lot of resources into aesthetic design. They know that a car that looks good attracts buyers.

Just for fun, we did a little research to try to work out which cars depreciate the least here in the UK. According to Auto Express, the 10 cars that depreciate the least – based on prices at three years/30,000 miles – are as follows:

  • Porsche 911 GT3
  • Range Rover Sport
  • Ferrari 488 GTB
  • Porsche Cayenne
  • Range Rover Velar
  • Porsche Macan Turbo Performance
  • Mercedes GLA
  • Porsche Panamera Sport Turismo
  • Mercedes-AMG GT-R
  • Bentley Bentayga

If you were to check this list against annual lists of the most reliable cars, you would discover very different makes and models. The most reliable cars are not necessarily the most valuable when it comes time to sell them second hand.

If you are planning to buy a second-hand car in the near future, you now have a better idea of how depreciation works. We wish you well in your search. And remember this: it is always best to get a second-hand car checked out by a mechanic you trust. Do not ever buy a second-hand model unless you are absolutely sure of its condition.

Sources:

Auto Express – http://www.autoexpress.co.uk/best-cars/87343/car-depreciation-the-cars-that-hold-their-value-best

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