Why you’ll lose $5k on your car in just one month


Happy New Year! If you own a car, you’re now $5,000 less well-off that you were on December 31.

Sorry to be the bearer of bad news, but the harsh market reality is that as each calendar year ticks over, the value of your car diminishes significantly.

Cars lose most of their value in the first three years from manufacture – and generally speaking, the greater the price of the car, the greater the loss.

The make and model also significantly affects how much your car depreciates. If it’s a popular model which is reliable and easy to repair, you will lose less. If it’s a highly unusual car (unless it’s a collector’s item), with an unusual colour and specifications, then you will likely lose the most as the years wear on.

Luckily it’s not all bad news – just as your vehicle loses value, so do all the others on the market – the trick is to make sure that you recoup that loss when you trade up.

Out with the old in with the new
The new year brings with it the opportunity to drive a bargain on your car, be it new or used.

Dealers will want to get rid of their previous year’s stock, so you should keep this front of mind when negotiating – they’re motivated and you can benefit, especially if you need to sell an existing car and want to trade it in.

Most of the major manufacturers are already offering very big discounts on 2016 models.

Making a date
A key piece of advice we always offer is to know the difference between the build year, compliance date and the model year. The build date is just that – when the car was built in the factory. The compliance date is when the car was imported (as most vehicles are) and complied with Australian standards. If a car is a slow seller sometimes the time between built and compliance can be up to 10 months, but on average is about two months.
The model year is a year set by the manufacturer which details a specific set of features, which is not always the same year. For example, a car can be built in 2015 and be a model year 2016 because the manufacturer may release that 2016 “model” in September 2015.

It very much pays to be aware of this difference, especially if you’ve seen the value of your car dip as we move into the new year. This knowledge is helpful whether you’re buying or selling a car.

Tried and tested
If your car was used when you bought it – congratulations! You will lose the least because the first owner bore the brunt of the depreciation.

Don’t start the new year with a financial hangover – make a new year’s resolution to save money with a smart investment on your car.

Michael Higgins is Director of HelloCars.

This article first appeared on Yahoo7.