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How to beat depreciation on your car

How to beat depreciation on your car

You’re burning money as soon as you drive your new car out of the dealer’s yard, so the saying goes. That’s because cars depreciate on average by around 14 per cent per year in the first three years, then up to eight per cent after that, says consumer watchdog Choice.

If you purchased your vehicle with a car loan, then it’s likely that you’ll still be paying off a depreciating asset in five years. But what if there was a way to slow the rate of depreciation on your prized possession so you can optimise resale value?

Unless you buy a collector’s item, which may hold its value better than most other vehicles, new models will lose some of their value over time. But there are a few buying tips to follow to get the most money of your set of wheels over the long haul.

Think like a buyer

Vehicle depreciation and desirability go hand in hand. The reason a car loses value two minutes after it’s left the yard is because consumers instinctively consider used items to be less valuable – even if they’ve only been used for two minutes. The key to minimising car depreciation is to minimise undesirable characteristics. Or to put it another way, minimising car depreciation is all about maximising the attractiveness of the car to future buyers.

Market research

Do your research to discover which makes and models best hold their value over the years and use this information to guide your buying decision.

Paint colour and transmission can make or break a sale too. Research shows that the most popular car colour choice among Australian drivers is silver, ahead of white and black. And vehicles with automatic transmission account for the majority of car sales in Australia, over manual cars.

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Ship shape

Hang on to receipts from regular car services as a record for potential buyers. They’ll be pleased to have found a well-maintained car and you’ll be in a better position to demand your asking price. Repair any minor damage to the car too, such as small dents or scratches, because this may further increase your resale value.

Timing is key

Buying at the end of the calendar year or just before a new model is due to be launched can increase your bargaining power on a new car. That’s because the dealer will be keen to clear older stock from the lot, so you’re likely to get a better deal on purchase.

Shop around

It might be tempting to opt for the first car loan you come across so as to get the ball rolling and secure your dream car.

But it pays to shop around for the lowest available interest rate on a car loan. For instance, the difference in total repayments on a $10,000 car loan at a rate of 8 per cent compared to one charging 12 per cent is $1,180 over five years. To find out how much you could save by comparing car loans use RateCity’s free car loans calculator.

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