The dreaded d-word is the amount of money that a car loses while a driver owns it. Car industry experts say it usually exceeds the combined total of fuel bills, servicing, car tax and insurance. It’s a sobering thought. Unfortunately, almost every car – unless it’s a classic Jaguar once owned by Steve McQueen – loses money like a dodgy investment.
Cars drop in value at different rates. The result is that some cost their owners much less over time. Philip Nothard, of car valuation expert CAP HPI, explained that depreciation is the difference between a car’s value when a driver buys it and what they get for it when they sell it on.
“Most cars will take their biggest hit of depreciation in their first year of ownership,” he says. “That gradually slows down after the third year. By the time you've reached the eighth year of ownership, depreciation often reaches a standstill.”
Nothard says too many drivers ignore depreciation. Or if they’re aware of it, they probably think of it in meaningless percentage terms. The best approach, he says, is to think in terms of cash. That way drivers can identify if one car is going to lose more or less money than another.
"The Maserati loses £16,500 more in depreciation than the Tesla"
Let’s use the Tesla Model S electric car as an example. This is rated as one of the best new cars at retaining its value. CAP predicts it will still be worth roughly 60 per cent of its original showroom price after three years and 36,000 miles of motoring. After that same period, a comparable Maserati Quattroporte would be worth 34 per cent of what its owner paid for it when new.
The difference doesn’t sound that great. But it means the Tesla would be worth approximately £40,000, and the Maserati £23,500. In other words, the glamorous Maserati looks a lot less appealing when it’s costing an owner £16,500 more to run.
This may sound like an extreme example. But the principle applies to the most popular types of car including superminis (small hatchbacks) and SUVs (family cars). The differences in depreciation can range between hundreds and thousands of pounds.
Whether one car’s brand name, style or driving experience is good enough to offset another’s value for money comes down to personal preference. But the least drivers should do is make an informed decision.
To view the predicted depreciation of used cars, CAP HPI has a user-friendly valuation site that lets drivers type in a registration number to see what a car will be worth in the future. It allows for adjustment of annual mileage, and includes an overview of other costs such as insurance, servicing and fuel.
So, when you start shopping around for your next car, don’t let depreciation catch you out.