South African motorists accumulate significant mileage each year, contributing to the depreciation of their vehicles.
Car depreciation refers to the reduction in a car's value from the time of purchase to its eventual sale. This decline is influenced by several factors:
- Age: Even cars that are not driven lose value over time.
- Mileage: Increased usage accelerates the rate of depreciation.
- Transaction Costs: Vehicles are typically bought at retail prices and sold at trade or wholesale prices, with dealer margins further reducing the resale value.
Mark Ridgway, chief technical officer at getWorth, a used car pricing firm, says the company has developed extensive data and pricing algorithms to accurately assess the used car market.
According to Ridgway, factors such as brand, model, mileage and market conditions, including the post-Covid-19 used car bubble, all play a role in determining a car's value.
He says new cars depreciate more rapidly than used cars. On average, a new car loses about 10% of its value within the first minute of ownership, 15% to 20% after one year and 30% to 40% after five years. These figures represent drops in retail value, excluding additional transaction costs.
Ridgway identifies other factors influencing a car's residual value in the South African market as:
- Price point: Entry-level models tend to retain value better.
- Car class: Luxury vehicles generally depreciate faster.
- Fuel economy: Vehicles with better mileage tend to hold value longer.
- Model popularity: In-demand models depreciate at a slower rate.
- Brand reputation: Brands known for reliability, such as Toyota, experience slower depreciation.
To minimise depreciation, Ridgway advises buyers to consider these factors when purchasing a vehicle. He suggests comparing prices of new and one-year-old models to gauge potential value loss, paying close attention to the quality and condition of used cars, and maintaining vehicles well to preserve their value.
He recommends purchasing pre-owned cars, which depreciate more slowly than new ones.
How much do cars depreciate in South Africa?
South African motorists accumulate significant mileage each year, contributing to the depreciation of their vehicles.
Car depreciation refers to the reduction in a car's value from the time of purchase to its eventual sale. This decline is influenced by several factors:
Mark Ridgway, chief technical officer at getWorth, a used car pricing firm, says the company has developed extensive data and pricing algorithms to accurately assess the used car market.
According to Ridgway, factors such as brand, model, mileage and market conditions, including the post-Covid-19 used car bubble, all play a role in determining a car's value.
He says new cars depreciate more rapidly than used cars. On average, a new car loses about 10% of its value within the first minute of ownership, 15% to 20% after one year and 30% to 40% after five years. These figures represent drops in retail value, excluding additional transaction costs.
Ridgway identifies other factors influencing a car's residual value in the South African market as:
To minimise depreciation, Ridgway advises buyers to consider these factors when purchasing a vehicle. He suggests comparing prices of new and one-year-old models to gauge potential value loss, paying close attention to the quality and condition of used cars, and maintaining vehicles well to preserve their value.
He recommends purchasing pre-owned cars, which depreciate more slowly than new ones.
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