What is Depreciation and Factors that Affect It in Case of a Used Car

It goes without saying that buying a car has multiple benefits, whether you are looking for flexible commuting, a personal vehicle, a status symbol or a mode of social distancing in the wake of the COVID outbreak. And a used car is a wise purchase indeed, as it is easier on the pocket than a new one. However, it is still a pretty substantial investment. Hence, you must make sure that it is worth your money and promises a decent resale value. This is why you need to understand the concept of used car depreciation and the impact it can have on the vehicle’s value. Now, depreciation essentially refers to the decrease in value of your car over time. Though it is less for a used car than a new one, you need to know more about it and also remember the factors that affect depreciation.

What Is Depreciation Rate for Used Cars?

Depreciation is the factor that affects the value of your used car over a period of time. When you use it on a regular basis, all its components and your overall car suffers from wear and tear, which reduces its value. This not only affects the present true value of your used car, but this is also taken into consideration by your insurer when you approach them for insuring your vehicle.

Every component of your vehicle, starting from the engine to the exhaust and the gear lever, is considered while calculating the vehicle depreciation rate as all of these are mechanical parts and are likely to suffer from wear and tear. However, any component of your car that is made of glass is not considered under depreciation.

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Factors that affect used car depreciation rate in India 

Now that you understand the meaning of used car depreciation rate, take a look at the various factors that determine this rate. This will help you get a good deal if you are planning to buy a used vehicle.

1.   Miles covered:

One of the most important factors to take into consideration for determining the depreciation rate on a used car is its mileage. The mileage of a vehicle is the total number of kilometres it has been driven since purchase. So, depreciation is higher for a used car that has been driven many miles, as it must have undergone a lot of wear and tear. However, sometimes, sellers use clocking to reduce the actual mileage of a used car to draw in buyers easily. Hence, check old MOT certificates and the car’s service history before making a decision.

2.   Reputation of the make and model:

Used car depreciation rate also depends on the popularity of the make and model you are buying. For instance, luxury cars or sports cars will lose less value over time than ordinary used cars. The market image of the car manufacturer, company history, and recent company events are some other factors that might affect the depreciation rate.

3.   State of the vehicle:

A used car that is in a good state will undergo less depreciation than one that is scratched or dented in places or has worn tires. Shoddy upholstery and malfunctioning electronics can also cause high depreciation.

4.   Type of fuel:

Fuel-efficient used cars depreciate slower than the ones that are not. This is the reason why hybrids and electric cars retain their value for a longer period of time.

ALSO READ: Essential Guide for Buying a Used Car 

Take Advantage of Lesser Depreciation on Used Cars

As stated before, used cars depreciate less than new cars, especially during the first year after the purchase. And if you go for a car that has had few owners, is a reputed make or model, and has not been driven much, you can save a ton of money easily. Try and go for a car that has been used for not more than 1 to 2 years. Also, make sure that it is in a good condition and all the paper work is in place. You can use a used car depreciation calculator to assess the future value of the vehicle too. This way, you can not only buy a car that will depreciate less, but also land a good deal when you are looking for second hand car finance.