Depreciation can be an intimidating concept, but we’ve consulted WesBank and their Communication Specialist to help unpack these concepts and explain how to protect your car’s resale value.
Estimated reading time: 5 minutes, 30 seconds.
When you buy your first car, be it brand new or a pre-loved model, you’re bound to hear the words, “asset depreciation” the moment you drive your new baby off the dealership floor. While your car’s value will depreciate the longer you own it and the more you drive it, there are ways to protect and maintain your car’s value for future resale.
The following tips can help you secure a better return on your car’s value when the time comes to trade it in, sell it privately, or upgrade to a newer model.
As the country’s leading provider of innovative vehicle and asset solutions, WesBank highlights some of the key factors that could affect the resale value of your car. But before we get into these factors, we want to make sure we’ve covered the meanings of common sales terminology used in the motor industry.
The first term is “Retail Price” — this is the recommended selling price, excluding any optional extras. Dealerships have expenses such as marketing, insurance, vehicle reconditioning and repairs, facility overheads and staff remuneration. This means that the dealership needs to factor some profit into the vehicle price, thus the retail value is normally at the higher end of the scale.
The “Trade or Market Price” is usually lower than the retail value. While this value may vary according to vehicle demand, this is the specific value that should be focused on when trading in or selling your car.
The term “Depreciation” refers to the decrease in an asset's value over time, due to various factors such as mileage and wear and tear.
It’s generally a very good idea to do some homework upfront before buying a car because having this knowledge can be beneficial later on when you want to sell the car. Some recommendations from WesBank in this regard are:
- Consider the historic market demand of the particular make and model of your vehicle.
- Is the three-door or five-door model more popular?
- Is automatic or manual more popular?
- Does the car run on diesel or petrol?
Used car websites can be extremely helpful when researching which cars are the most popular, the fastest-selling, and which have maintained their resale value over time. The best time to trade in a car is when the car’s trade value is more or less the same as the settlement amount owed to the bank.Kutlwano Mogatusi, WesBank’s Communication Specialist, explains that; “Variables such as mileage and the overall condition of the car will also affect the resale value. It can be tempting to consider a bargain deal on a particular vehicle because it has a high mileage, but this could prove to be costly down the line. If the vehicle also requires ongoing maintenance, it may be worth far less than you expected when the time comes to sell it.”
It’s crucial to look after your car by following the manufacturer’s recommended service intervals and servicing it regularly. Some extra TLC can work wonders for your car, and for the future buyer/dealer. Regular services will reassure the dealership that the vehicle has been well maintained and the likelihood of the vehicle mechanics malfunctioning is low.
Here are a few simple tips for maintaining your car’s resale value to ensure you get the best price for your car:
- Choose the vehicle make and model carefully — this includes the colour (white or silver are your best bet), and car brand (some brands are expensive to maintain or require more after-sales support).
- Keep a detailed service record — be diligent, stick to the maintenance schedule, and keep a record of everything that has been worked on in your vehicle. We really do mean everything here. A clean record will count in your favour when it comes to price negotiations.
- Use it, don’t abuse it — this is fairly self-explanatory and applies to every aspect of your car, from the brakes and transmission condition, to paint chips, dents, etc — all of these elements will be assessed by a potential buyer. Like we said earlier, some TLC goes a long way.
- Keep your car’s papers in order — this includes the original vehicle registration form and the proof of payment for the annual vehicle licence fee. You should also ensure there aren’t any outstanding fines or e-Toll costs owing on the car.
- Take care of the small things — if you notice something wrong with your vehicle, anything from an unusual sound in the engine to a few scratches, have it checked out and deal with it. To preserve your car’s resale value, it’s always better to be safe than sorry. In short, when in doubt, have it checked out!
- Use a reliable mechanic — it’s recommended that you service and maintain your car at a workshop with a good track record and trusted mechanics. Generally, franchise dealerships have expert vehicle knowledge and qualified technicians who are trained to work on your specific vehicle brand.
- Where you park your car can impact its resale value — while a closed garage is ideal, this isn’t always possible. If you don’t have access to a closed garage: try not to leave your car parked under a tree and avoid leaving your car in the sun for long periods of time in order to maintain the exterior paint (you should also consider using a sun visor and even car seat covers to preserve the car’s interior).
“Another useful tip is to resist over-embellishing your car with aftermarket accessories. While part of the joy of owning a car is making it your own, these personal style additions could impact negatively on its resale value. You might think oversized rims, outrageous body paint or a booming sound system are improvements but be aware that the next owner or the dealership where you plan to trade in your car, may not!” cautioned Mogatusi.
“Keeping your car clean and in the best condition possible is probably the best way of ensuring it retains its value over time. A small scratch or dent might not seem a big deal now but accumulating many such dents or scratches over time will detract from the car’s overall appeal. Maintain the appearance and mechanical condition of your car during your ownership cycle to ensure a reasonable return on your investment when the time comes to sell it,” says Mogatusi.
Keep all these tips in mind when looking to buy your first car and when applying for finance through WesBank’s unique Graduate Finance offering.
To do some more hands-on research of your own, book a test drive today!