Depreciation is the difference between what you paid for a car and the amount you can get back when you sell or trade it in.  A new car loses approximately 20% of its value when it is driven off the showroom forecourt, and cars lose between 15 – 20% of their value each year, but, different makes, models and even colours will all hold (and lose) their value differently.  However, it seems it is often ignored or forgotten about when people are purchasing a car, even though for car owners who like to change their car regularly the financial effect can be significant.

When 2000 UK drivers were asked about depreciation in an Opinium survey*, commissioned by, an independent provider of GAP (Guaranteed Asset Protection) car insurance, one in ten (10%) drivers say that depreciation is not something they think about. Older drivers are more likely to think about depreciation than younger drivers when they are buying a car. Almost half of drivers (44%) in the survey say they keep their car until it’s run into the ground, which explains why they do not consider depreciation (men 40% and women 48%).

We’re seeing some great deals in the new car market, which could mean second-hand cars lose their value even quicker if more buyers than usual choose new. However whatever car you buy, one thing is certain, as soon as you drive off its value starts to depreciate. If you normally look to trade your car in after a few years, it’s definitely worth doing some research on whether the make / model you have in mind tends to drop like a stone or holds it value,”  said Ben Wooltorton, Chief Operating Officer at

He continues, “Depreciating factors that affect the value of a vehicle regardless of its make and model include things like mileage, number of previous owners, service history, general condition and colour. Reliability, safety, and reputation tend to apply to specific makes or manufacturers and typically do not change over the course of ownership.”

Depreciation can also affect the amount of money that car owners can claim from their insurance company, in the event that their car is written off or stolen.

“If a two-year old car is involved in accident and is written off an insurer will only pay out on its current market value, rather than the original price,” said Ben Wooltorton. “This could leave car owners still owing money on outstanding finance agreements for a car that no longer exists.”

GAP (Guaranteed Asset Protection) insurance can help bridge the gap between what you paid for a car and the amount you receive from your insurer if you make a claim, in the event your vehicle is written off or stolen.  A GAP insurance policy from a specialist insurance provider, like, starts from just £77** and is significantly cheaper than those offered by car dealerships.  Cover is available for vehicles worth up to £50,000.

Top Ten Tips on Car Depreciation

In addition to a car’s age, where the years of one, three and eight often signify sharp price drops, there are a number of factors that determine a car’s depreciation rate – some apply to all vehicles based on how they have been used and others are due to the specific characteristics of a particular make and model.

Five factors affecting the value of a vehicle regardless of the make and model include:

  1. Mileage – the average mileage is around 10,000 per year.  The more miles, the less your car is worth.
  2. Owners – the more owners a car has, the less it will be worth.
  3. Service history & general condition – a full service history from a manufacturer, approved garage or dealership helps to maintain a car’s value.  The upkeep and maintenance of a car will also help retain its value, as dents and scratches can seriously affect its resale price.
  4. Colour – generally speaking, the popular selling colours of grey, black, silver, blue and white tend to be the best colours for holding their value. Slightly bolder (red) or off-the-wall colours might not have the same demand, so not have such a high re-sell value.
  5. Desirability – if the vehicle is in high demand or is rare, the more residual value it will hold.  If you are lucky enough to purchase a car that is on trend it will suffer much less depreciation, provided it is still on trend when you come to sell it. Similarly, if there is very little demand for your car then you can expect its value to drop dramatically.

While the below factors have varying effects on a vehicle’s value depending on its make and model and                   the needs of potential buyers:

  1. Economy – cars with good fuel economy are more desirable, and therefore tend to hold their value better.
  2. Vehicle tax – buyers looking to run their vehicle on a budget may be put off by high vehicle tax.
  3. Reliability – mechanically reliable cars and those with reasonably priced spare parts are more in demand because they cost less for upkeep in the long term.
  4. Warranty Length – vehicles with a long manufacturer’s warranty attract a higher resale value.
  5. Size – bigger cars tend to depreciate more quickly due to higher running costs.