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Why do cars depreciate in value?

Car Depreciation – How To Minimize It ?

Don’t we all just love that “new car” smell, the proud and excited feeling when you tell your family and friends that you have just bought a new car?

However, these non-financial utility-based values fade away very quickly, which is immediately reflected as you drive off the lot in your brand new car. Those values and experience that are seemingly trivial are actually highly valuable as the value of your brand new car plummets by a few thousand Ringgit once you drive it off the dealership. Ouch !

But why does a car’s value depreciate so much, and why does it all happen in just a matter of seconds?

Why do cars depreciate in value? 

What is car depreciation?

Car depreciation is the amount of a car’s value that you have used over a period of time. It can also be understood as the difference between a car’s value when you buy it and when you sell it.

Car depreciation is like a “silent thief” and will always be there. It quietly and continuously reduces your return on investment in your car.

 

How much does a car depreciate?

The moment you drive your new car off the lot, its value may decline by as much as 10%! While the rate of depreciation varies by car brands and models, a car can depreciate by more than 20% after just one year!

And hey! It does not stop there! Your car will continue to lose around 10% to 20% of its value each year for the first 5 years. By the end of five years of ownership, you will be looking at the possibility of your vehicle being worth about 40% of the price you originally paid for it! Are you reconsidering buying a new car now?

The bad news is, your car will continue to inevitably depreciate down to their bones, which would be their metal body. This is known as the car’s “scrap value.” The good news is, your car will always be worth something even after decades.

 

Why do cars depreciate?

Here are a couple of reasons why cars depreciate:

  1. They lose their value through gradual wear and tear over time. The more and further you drive which leads to higher mileage, the higher the probability of having to pay to fix or maintain your car.
  2. Newer models are launched from time to time. When you happily purchase your “new” car, the next model of the similar vehicle is already in the pipeline to be launched in the next few months. The improved features and perks of the newly-launched model will reduce the value of the model you just bought as your car will not be as comparable.
  3. From “new” to “used” in one second flat. It’s amazing how much value the word “new” can hold. That flashy “new” label that was on the car you just bought immediately changes to “used” as soon as you drive it off the lot.


How can we minimise the depreciation of our cars?

Based on our experience at ezAUTO.MY, here are some of the pro tips that we have learnt from helping our customers sell their cars at the highest value possible:

 

  1. Don’t worry, there is no harm in buying new cars at all, as there are always pros and cons and opportunity costs for either choices. What you can do is consider choosing timeless, and popular colours when buying a new car, that generally anyone from any walk of life can accept. Colours like white, black and silver will never go wrong in car colour choices. In fact, these are the best selling car colours and also the fastest selling cars in our list.
  2. Choosing popular brands and models, and also brands that have ample service centres and after sales support helps in maintaining the value of your cars as well! These long lasting car models have ample supply of affordable spare parts for one thing, and their “less complicated” build are easily serviced and repaired by almost any mechanic you can find around your area, as they have lots of experience in repairing these common cars, thus easier to maintain in tip top condition. Cars in the mid tier range like Perodua Myvi and Toyota Vios sell really well, and they are some of the least depreciated cars that we have sold for our happy customers at really good prices.
  3. In support of point 1 & 2 above, selling it earlier before the year ends also help in getting a better price as well. When the clock ticks into another year, your cars will depreciate again, counted as being 1 year older than the latest model. So, another plus point in choosing cars that sell fast, helps you sell at a higher price as well.
  4. Selling your cars to the right market also helps in getting the highest selling value as well. Diversify your options. Time is also money,  instead of going to each car dealer one by one to see who “chops” you less with the lowest price, platforms like ezAUTO.MY (which is free of charge and do not take commissions) helps you sell your cars to our nationwide list of credible car dealers, all around Malaysia, and within a day, we could help you find the best dealer who is willing to pay for the highest price for your car.
  5. Most car dealers may not even bother looking at your car’s condition before “chopping” you with a low price, but at ezAUTO.MY, our inspection centres all around Malaysia practices a complete and legitimate valuation and inspection process of your car (that is in compliance with the regulatory and government agency standards), to attain the fairest value before bidding it off to all our car dealers around Malaysia, thus protecting the value of your car better.

So are you the type of person who likes to buy new or used cars? We hope that these tips will help you compare and decide the pros and cons before committing into a big purchase. If you ever need help in selling your cars, feel free to contact us at ezAUTO.MY!

Pro tip: You can also buy a nearly-new or used car to avoid the steepest depreciation from our platform ezCLASSIFIEDS which is launching soon! Find out more at www.ezauto.my now!