Tips to reduce depreciation rate of your car


Reducing your car’s depreciation rate is definitely a matter of great importance if you wish to get greater resale value out of it. There are several simple tips and tricks that you can use in this regard. You should also use tools like IBB Residuals to find out accurate valuation forecasts for your desired period of time.

You should always look to purchase the right model, brand and variant. The first and best tip you can remember is that the right model and trim matters hugely when it comes to overall value. Reliability and brand value play a vital role as well. Brands like Mahindra & Mahindra, Maruti Suzuki, Tata Motors and Hyundai enjoy top class brand value in the country as compared to the likes of Fiat, Nissan and Renault. Cars with higher reliability and brand value perceptions always have higher prices in the second hand market as compared to their counterparts. The right model and trim also matters. For example, the Swift which is Maruti’s premium hatchback, has a lower rate of depreciation as compared to its Ertiga MPV.

You should always choose the right model from a reliable and high value brand. You should also choose your fuel type wisely. You might have to shell out INR 1-1.2 lakhs extra for a diesel car but this will give you cheaper running costs and will also give you higher resale value. The right trim is worth the extra money you pay up at the time of buying your car. If the variant comes with all the bells and whistles in terms of features including power steering, automatic air conditioning, power windows, music system and other attractive features, you can be assured of higher value. Buying the top model will help you bring down the depreciation rate immensely to say the least.

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Depreciation rates are approximately 20% for the first year and this goes down to 10% over the next two years. You should think of holding onto your car for longer periods since depreciation rates go down to 5-7% in the next few years. Even though 50% of your car’s value is lost within 5 years, the depreciation rate will be slower over a longer period of time.

Cars which are regularly serviced and well maintained will command higher prices in used car markets. Cars with immaculate service histories will always have higher selling prices as compared to those with disjointed service records and poor maintenance.

The right color also matters when it comes to reducing depreciation. There are different annual depreciation rates for every color in the market. White and Black have the highest depreciation rates of 23% and 18% respectively while colors like silver, grey and red have 16%, 13% and 10% depreciation overall. Colors like green and yellow/gold have the lowest rates of depreciation, i.e. 2% and 3% respectively. Always be careful about the model year you end up opting for as well. Many a time, there are special discounts offered by dealerships on cars to clear out old stock. Even though we purchase a new car, it may well be from the old stock and another year may be added to the car’s life on account of it being the previous model year instead of the present one.

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