What is Car Depreciation? Essential Things You Need To Know

Like most of the tangible assets present in this world, your cars will also go to get depreciated, and their monetary value will get down from the day you saw it at the showroom while buying. However, the car depreciation rate works differently as per the make and model of the car. To understand the whole scenario of car depreciation in detail, we have penned down the process by considering the advisory of automobile experts and auto mechanics.

What Is Car Depreciation

Average car depreciation is fundamentally the value lose between what you pay while buying your car and how much you sell it – regardless of the duration. In simple words, car depreciation can be considered the rate at which the vehicle worth falls over the long run. There is no denying the fact that we pay a high amount to get things when brand new. This scenario is the same with cars that price is highest when they are new. When a vehicle gets more seasoned, its value starts diminishing as per time.

Factors of Car Depreciation

There are various variables responsible for your car depreciation. As an automobile enthusiast or a person looking forward to buying a new car, you should understand that depreciation works differently depending upon makes and models.

Previous Buyers

Having more buyers will mean confiding in a bigger number of individuals and a more prominent possibility.

Warranty and the service duration

Is there any sort of warranty left in your car? Some car manufacturers offer 7-8 years of cover and can assist with keeping higher resale esteem. As will stamps from the principal vendor showing you’ve kept to the suggested administration history.

Brand and model dependability

If you are looking forward to purchasing a car that is known for bad performances? It will restrict the number of possible purchasers later on, and bring down the worth dependent on request.

Brand and Model Attractiveness

Reputed Car brand offers unwavering quality, and interest will normally deteriorate at a lesser rate.

Mileage

Smaller and more eco-friendly vehicles will generally devalue less. They cost less to run and engage a bigger pool of purchasers, keeping requests higher.

How To Calculate Car Depreciation

The average car depreciation calculation process is done by utilising the prime cost method or the diminishing value method. The common aspects that are involved in the estimation include the expense of the vehicle, which covers the sum paid upon buy and any extra cash spent on transportation, enrollment and upkeep of the vehicle.

Both vehicle deterioration computation techniques share the accompanying components:

1. Number of days held
2. Cost or base worth of the vehicle
3. The viable existence of the vehicle

The prime cost method functions in which the car value gets dipped by the fixed rate of its expense. The outcome is the fixed drop in value over the period.

Car’s Price x (Days possessed ÷ 365) x (100% ÷ Effective life in years) = Lost Value

In the diminishing value method, the depreciation value is utilized by the vehicle’s base worth. The Base worth incorporates its underlying buy cost and different expenses brought about on the car since purchase. The equation for the estimation is:

Base Value x (Days possessed ÷ 365) x (200% ÷ Effective life in years)

Slowest Depreciating Cars Australia

According to the expert opinion and reviews, we have mentioned some of the slowest depreciating cars in Australia.

Toyota Corolla

One of the highest selling cars in Australia is also high in demand for both new and old models. Its depreciation rate touches 27-36% after three years.

Mazda 3

Mazda 3 is a classic car of the modern era and one of the best cars in Australia. Its depreciation rate touches 27-36% after three years.