The moment a car rolls out of the dealership garage, it immediately sets itself up like ice cream in a cone under the scorching heat of the sun. Its market value instantaneously melts down by 10% once the tires reach the road and further slices off in price 5% a year later. If you are not lucky, and depending on all the circumstances your car went through, market depreciation could even reach as high as 25%.
In the succeeding years, the depreciation rate will be a lot slower than the first year, albeit significant enough to impact its resale potential. By the time it hits its 5th year, the car will only be about half of its initial market value. Different cars, different depreciation rates. A more precise estimate for a specific model can be seen upon running a VIN check. The market value of vehicles is dependent on many factors. If you are looking to sell a car in the future, you should take this into consideration.
Moreover, the recent COVID-19 Pandemic has taken everybody flatfooted. It has made a far-reaching impact across the world. So, it is not surprising it will have its effects on the used car market too. As the unexpected happened, many forecasts made in 2019 should be abandoned by now. Despite everything that happened in 2020, good news awaits for consumers who are looking to buy vehicles.
The pandemic had wreaked havoc on the release of many new models intended for 2020. Delays, low quarterly sales, and the demand and supply being down have made many new cars more lucrative than some used cars. And thus, even used cars, to earn a little leverage versus new releases, have to dip much lower in price, in order to make their deals sweet enough to entice buyers.
2020 was not a good year for everyone. Many people have struggled financially due to lay-offs and closures. To make ends meet, plenty of newly-released used cars have become available for purchase. A lot of them are still in pristine conditions. If you want to make the most of the residual value of the car and regain it, you have to manage some factors that affect its future pricing. Curious to know what these other factors are? Let’s discuss them shortly.
Vehicle History and Reputation
More than the age of the car, bad history and reputation can also pull its price down faster than any other factor. With just a bare minimum of body scratch, it can reduce a car’s value by as much as 30%. We are not even talking about serious damages with a repair cost that can exceed the original purchase price. Knowing that in just a split second of carelessness can lower the car’s market value, should make safety and carefulness all the more reason to be on top of your mind. Otherwise, you should spend a little to refurbish your car back to the original condition. Or maybe just to mitigate your car from lost shine and luster.
Brand Name and Vehicle Type
In most cases, Japanese car brands are more preferred by consumers than either their American or German counterparts. This is probably because spare parts are a lot easier to find and are pretty much cheaper. Thus, Japanese vehicles are among those with the lowest depreciation rates. In fact, half of them often make it to the top ten. Likewise, the same market forces are also at work on vehicle types. Sedans are losing ground to SUVs as we speak because of the latter’s overall value proposition and growing consumer preference. Some models are on their last legs due to declining sales records. As such, you should keep yourself abreast with the latest development in the auto markets. Market prices fluctuate. Who knows your dream car may be within your reach sooner than you realized?
Mileage
All physical items are subject to wear and tear. It is inevitable, but prolonged use can speed up the degradation. Cars are no exception to this. The more you drive it, the more its condition is tarnished. Responsibly handling and maintaining the car may slow it down, but you cannot stop it. How you drive and where also matters. If you tend to push the limits of your vehicle and expose it to extreme environments, you may shorten its lifespan. Such worries often cross the mind of car buyers. Hence, a high-mileage car does not typically command a high price, unless it was driven by a world-champion racer or was used by a popular celebrity in the past.
Number of owners
Imagine, you have a box of freshly baked cake. It is expected to be delivered to you soon, but as bureaucracy requires, it needs to swap hands several times before receiving it. What do you expect the finished product will be? What if, during the time of delivery, something wrong happened with the first courier, and the second courier has to fetch it for you? How do you expect the cake to look? Car buyers have similar worries when it comes to used cars. More changing of hands means more details to tell, especially if it is transferred every so often and with little time between past owners. Too many details may also not have been recorded. Thus, making the car a risky purchase. Frequent turnover also invites suspicion that the car did meet the satisfaction of previous owners and thus they have to sell it not much later than when they bought it.
Service History
If maintenance is always done on time and properly, this will reflect on the stamps and receipts. This proves that the car’s service history is always in line with the automaker’s guidelines. Such records give a good impression on buyers, making the stated price more agreeable for them. It clears any doubts in their minds regarding components. It answers questions like whether the tires and brake pads are of the right fit and in good condition. Or, if the necessary liquids are replenished on time, without any problem. Beware of aftermarket replacements, they may not be of the same quality as those recommended by the manufacturer. Repairs that were done by dubious repair shops can also give a bad impression on car buyers. Don’t install too many things beyond the stated gross weight limit. They may not be optimal for your vehicle’s overall performance. As always, review the owner's manual before making any drastic changes. This is a good practice in making sure that your car enjoys a healthy long life.
Warranties
Warranties are good selling points to keep potential customers hooked. They serve as written guarantees of ‘free’ repairs if the need arises and if it meets the conditions required by the manufacturer. Though a warranty package may be comprehensive, each coverage varies in duration and qualifications. Some not lasting more than two years or 24,000 miles, while others can last for a lifetime, without any restriction on mileage. Many emissions-related warranties are often featured with the former as their usual restrictions, while the latter is often offered in powertrain warranties. Longer warranties can usually be found in models that are perceived to be reliable. Their manufacturers are confident enough to give customers a generous offer since they trust the quality of their handiwork. As for others, they are on the conservative side of the market, playing it safe and not extending it further than the bare minimum so as not to risk their financial standing. But, then again, you are better off with longer warranties as it provides longer protection not just for you but also for the future owner if you decided to sell it in the future. Some warranties are not transferable, however. So, you really have to do your research to keep your expectations realistic.
While this set of guidelines may help you slow down the pace of your car's devaluation, not everything depends on them. Much of it will also come in as your prospective buyer test drives the car. Hence, it is also important that you make sure that your car is indeed in its top form and condition in order to command a much higher price for it.
March 17, 2021 at 10:17PM
