Depreciation is an accounting concept that deals with the fact that many assets, although not all, lose value as they age.
When it comes to cars, the vast majority will lose significant value over time. The only exceptions are usually classic or limited edition cars, which may actually increase in value. Most brand-new cars will lose between 50 and 60 percent of their value within the first three years.
Car leasing Bristol
If you are interested in leasing a car, there are several firms that specialise in car leasing in Bristol and the surrounding areas. Many of these companies have online resources to help you, such as autolyne.co.uk/car-leasing-near-me/bristol.
How to minimise depreciation
The rate of depreciation can be controlled to some extent and depends on three key factors: price, running costs, and quality.
The initial purchase price is an important factor, as depreciation is given as a percentage. If the rate is 50 per cent, this means a £40,000 car loses £20,000 of value, whilst a car bought for £18,000 would only lose £9,000. In real-money terms, this is a significant difference.
Fuel economy and other running costs have a significant impact on depreciation. Larger cars will need more fuel and premium cars will often need expensive parts, with both depreciating faster. This is partly why smaller cars are so popular.
The other factor that affects depreciation is the concept of quality. There is a huge amount of data on all cars, so it is fairly easy to establish which are the best makes and models in terms of performance, economy, reliability, etc. Subsequently, cars deemed higher quality should depreciate at a slower rate than those at the opposite end, although they will – of course – cost more initially.
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