Car depreciation is how much ‘value’ your car loses over the 10-year period it has on the road. After that 10-year period, the only value remaining would be the “scrap” value of your vehicle. Basically, it’s the reduction in the value of an asset over time.
Car Depreciation 101
For cars that are less than 10-years old, there will be a Preferential Additional Registration Fee (PARF) rebate payable upon deregistering the car. This is also commonly known as the scrap value of the car. Most dealers will be able to provide you with the information you need. Otherwise, you can check out the PARF Rebate Calculator here!
Simply put, the total depreciation is the amount you initially paid for the car minus the scrap value.
Take an example of a Toyota Corolla Altis that retails at $112,888. The scrap value at the end of 10 years is $8,850. Assuming that the car was bought brand new and used for the 10 years, the total depreciation would be $112,888 – $8,850 = $104,000.
This means that the car loses $10,400 in value annually. In other words, it costs $10,400/12 = $867 monthly just to own the car. The amount is a base price of owning the car, even if you don’t use it daily.
Cars that depreciate the most
It has been warned by experts to stay away from car manufacturers that have financial issues, like Chrysler and Saab. Values of models from both these manufacturers have plummeted.
The values of models like the Chevrolet Cobalt can drop a staggering 80% after purchase. One of the reasons is because the design has not been updated for four years.
Subcompacts from Kia and Hyundai are now being sold to fleets and this instantly decreases their value. Other models to avoid are the Chevrolet Malibu and Ford Taurus.
Once a car is driven out on the roads from the sales lot, their value starts to drop. What you can do before buying a car is do some research on which type of vehicles are the most reliable. At the end of the day, your care for the car, the mileage and the whims of the public will determine how much value your car retains. Find a car that fits your needs, budget and liking. It’s important to make informed decisions before you meet with a dealer and not make it on the spot in the showroom.