Depreciation guide: which cars lose least money from new?

04/11/09

It's motoring's biggest hidden cost - get it wrong, and you could lose cash needlesslyDepreciation. It’s the difference between what you pay for a car, new or second-hand, and what you get back when you sell it. For most of us, writes Ray Castle of motors.co.uk, it’s the biggest single cost we face in car owning. But it’s a hidden one, ticking away silently until the time comes to sell – when we realise that the car we bought not so long ago is now worth only a fraction of what it originally cost.

It’s a part of your car-owning budget that you need to manage, and manage well. Let’s give some pointers.

Cars that everyone loves and wants to buy lose value slowest
The Mini Cooper still enjoys big sales and huge popularity, even though it’s eight years now since it launched. And the diesel-engined model is one of the fuel-efficient, ecologically sound cars you can buy – at any price. No surprise then that a Mini Cooper diesel is, after three years and 36,000 miles on the road, still worth fully two-thirds* of the £15,000 it costs brand new. That’s an amazing performance which none of its rivals match: most will have lost half of their original value, perhaps more. While the Mini will have slipped in value by £5000, most other £15,000 cars will have lost at least £7500. Choosing the Mini therefore leaves you £2500 better off.

Old models and big cars with thirsty petrol engines depreciate the fastest
The Citrn Xsara Picasso 1.6 Desire is a good car. But it is also an old model that won’t be available new for much longer. Citrn’s official price for the car is £17,095. Buy one, though, via the scrappage scheme – which guarantees a £2000 discount if you trade in a car that’s at least 10 years old – and Citrn has an awfully tempting offer for you. They’ll add you £4900 to that £2000, so you’ll pay just over £10,000. An amazing saving.

But when the car reaches three years old it is expected to be worth just 20% of its list price when new – or £3400. Of course, if you plan to keep the car for several years more, this won’t matter in the slightest. But it is worth bearing this in mind before you leap to buy one.

Alternatively, you might have just won the lottery and fancy Volkswagen’s luxury flagship, the Phaeton (right). It has a huge cabin, a 6.0-litre petrol engine and four-wheel drive, and its list price tops a cool £75,000. But this is another where its value after three years and 36,000 miles dwindles to just 20% - or, in this case, £15,000. If you paid list price for such a car, depreciation will have cost you close on £400 a week.

Fast-depreciating cars make bargain second-hand buys
That’s why cars such as Peugeot 407 saloon (left), which lose three- quarters of their value by their third ‘birthday’, are excellent value second-hand at around £4500 for a 06-reg 70,000-mile 2.0 diesel. Ford Mondeo estates, which have lost over two-thirds of their new value at a similar age are fantastic buys, too. £4200 gets a 06-reg 77,000-mile 2.0 LX from a dealer.

It also further explains why in-demand cars such as Minis are so expensive – you’ll pay upwards of £5000, even for seven-year-old ones.

Older cars hardly depreciate at all
Depreciation is at its most savage during a car’s early life. Some models lose a third of their value, perhaps more, by the time they’re a year old. But by the time they’re reached three years, most of the damage is (usually) done. And by the time they are five, depreciation for most will have slowed to just a few hundreds of pounds decrease a year. If you buy a two-year-old car, keep it for three years and then sell it, you’ll have a reasonably smart vehicle but will save roughly half what you’d lose to depreciation if you’d purchased a similar model from new.

Once cars reach eight years or older, their value depends on condition and mileage as much as it ds on age. And depreciation will be no more than a few hundreds of pounds per year. Choose carefully and it is possible (in theory) to own an old car for a year and sell it for close to what you paid.

So how do I know whether the new car I want will depreciate quickly?
There are no guarantees. But a rule of thumb is that high-image, in-demand cars keep more of their price than older, so-so designs. That includes pretty much anything small to mid-size wearing a badge from one of the prestige German manufacturers. There are also a few surprises: Fiat 500s are currently expensive second-hand, while there are signs that Toyota’s new iQ city car will shed value more slowly than most. But sometimes depreciation defies logic: look for an example at Toyota’s Aygo city car, which loses value more slowly than its arch-rivals the Peugeot 107 and the Citrn C1 even though (except for badges, seat trim and minor body changes) they are the same car, made in the same factory.

To check whether you intended new car purchase is a depreciation winner or loser, scan the prices on motors.co.uk for three-year-old examples or your car.

For more great buying and owning advice – and to view over 150,000 new and used cars – go to motors.co.uk

*Depreciation figures from What Car?