Is your new car losing value fast? Here's why
What's the story
Ever wondered why your shiny new car seems to lose its value the second you drive it off the lot? In India, vehicle depreciation is more than just a buzzword—it's a reality check for every car owner. From determining your car's resale value to shaping your insurance decisions, this rapid value dip affects you in more ways than you think. In this article, we break down the facts about depreciation.
Impact
How depreciation affects your car's value
A new car depreciates the most in its first year—around 20%. For the next four years, depreciation averages 10% per year. Overall, a car can lose 50% of its initial value within five years. However, the rate of depreciation can vary greatly depending on the brand, model, condition, and market demand.
Calculation
Calculating depreciation for insurance purposes
Indian insurance companies apply depreciation to calculate the Insured Declared Value (IDV) of vehicles. The IDV is important because it's the highest amount an insurer will pay for a claim. It gets lower as the age increases: 5% depreciation for cars under six months; 15% for those six months to a year; and it goes up to 50% for cars over five years.
Minimization
Tips on minimizing vehicle depreciation
A well-maintained car depreciates at a slower pace. By sticking to regular servicing as per the manufacturer's recommended schedule, you can ensure your car remains in optimal condition and hence more appealing to used car buyers. Plus, opting for models with a reputation for longevity and dependability can also contribute to preserving more of your car's value over time.
Perception
The role of brand perception
Brand perception plays a crucial role in how well a vehicle holds its value over time. Reliable brands see their vehicles depreciate at a slower rate than those from brands with less positive reputations. Doing your homework before buying a new or used car can help you understand which brands and models are more likely to retain their value in the long run.
Buying smart
Making smart choices when buying new cars
Choosing cars with strong resale values greatly minimizes financial loss from depreciation when you eventually sell or trade them in. By doing a little homework on market trends and knowing what features are in high demand for used cars, you can make more informed purchases that will pay off down the road.