Four major factors influencing vehicle depreciation in South Africa

Every kilometre you drive reduces your car’s value due to depreciation in South Africa. However, the experts at GetWorth have outlined the four key factors they consider when calculating vehicle depreciation in the country.

• Age: Even if it’s not driving a lot, a car sitting is still losing value.
• Mileage. The more kilometres you add to your car’s overall mileage, the quicker its value drops.
• Transactional costs: If you buy a car at retail price and sell it at trade or wholesale price, the dealer’s margin reduces the value you ultimately receive.
• Maintenance: If you look after your car mechanically and cosmetically, you can stave off some of the effects of depreciation on your vehicle.

VEHICLE DEPRECIATION IN SOUTH AFRICA

According to Mark Ridgway, Chief Technical Officer at GetWorth: “We’ve invested heavily to gather vast amounts of data to build pricing algorithms that give us the most accurate view of the used car market. Vehicle brand, model, mileage and even the post-COVID-19 bubble all affect the data.” However, when it comes to vehicle depreciation in South Africa, Ridgway explains there are some clearly defined trends.

New cars depreciate much faster than used cars. In fact, the moment you drive a brand-new car off the dealer floor you’ve lost around 10%. After one year, around 15% to 20%. And after 5 years approximately 30% to 40%. And this is before you factor in a transactional cost loss of roughly 10%.

WHAT OTHER FACTORS AFFECT RESIDUAL VALUE?

“Ultimately, you can’t stop vehicle depreciation in South Africa, but you can make careful upfront choices to help slow it down,” explains Ridgway:

• Affordable entry-level models tend to hold their value better.
• Luxury and high-performance cars generally depreciate faster.
• Cars with better fuel economy hold their value longer.
• In-demand models do depreciate slower.
• Reliable brands with a good reputation depreciate less.

PAY THE RIGHT PRICE

So, let’s say you’ve taken all of the above into account, how do you know you’re paying a reasonable price for a car? Look at the prices of the one-year-olds in the market, to get an idea how much value that model might lose. From there, always hunt for the lowest mileage car in the best possible condition.

If you pay an above market price, you won’t ever recover the difference. And remember, once you’ve purchased a car, keep the mileage down and maintain it well, both mechanically and cosmetically. This is the best way to stave off vehicle depreciation in South Africa.