long term car loans in ontario canada

Car Depreciation: Absolutely Everything You Should Know

Posted by on Feb 27, 2024 - Archived under Uncategorized

A car loses value over time due to depreciation. All cars experience it, though at varying rates depending on the market, perceived brand value, cost, and desirability. In this article, we’re going to show you how car depreciation is caused and what you can do to minimize it and save money in the long term.


Within the first five years of ownership, a new car will lose between 40 and 50 percent of its value. Current value against end value, which will be taken into account when calculating the car loan, will be one factor. The lender wants to make sure the car will be valuable enough for them to recoup their investment should they have to sell it in the event of a default.

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What Causes Depreciation?

As was stated at the beginning, there are numerous elements that contribute to car depreciation. While some of it is beyond your control, you still have some power over other elements. influences such as


Manufacturer: Certain car companies depreciate slower than others. For instance, high-end producers like Lincoln, who are renowned for their quality, can degrade more slowly.


Least depreciating car brands


Model and trim: There are some car models that are more coveted than others. For instance, because the market favours those latter vehicle types, sedans are now worth less than crossovers or SUVs. A car becomes more attractive when it has extras like modern safety features or navigation, which reduces its rate of depreciation.



Year and mileage: Depreciation is heavily influenced by the age and mileage of your car when you decide to sell it. The value of a car decreases with age. The less it is worth, the more miles it has travelled.



Condition: A vehicle’s condition has an impact on its trade-in or resale value. This is a variable that you can affect. When it comes time to sell, your vehicle can be worth more if you take care of it, keep it in good shape, and make repairs promptly.


Reviews and ratings: By affecting a car’s desirability, the safety rating and owner reviews can affect how much it is worth. A vehicle with good ratings will be more valuable than one with low ratings.


Safety and fuel efficiency: A car with a good safety rating is more valuable. It is also worth more if it has good gas mileage.


Its resale value, which is also taken into account when determining a loan, is affected by all of these factors. Car depreciation would be computed or averaged throughout the course of a 48-month loan term. It takes into account the price you will have paid at that point and the price at which you could resale it. In order for the lender to always get their money back in the event that you default, your monthly payments would be set to stay a little ahead of its worth.


How to Minimize Car Depreciation

Keeping records: The only information a potential buyer or dealership will have about the state of your automobile is its service history and any invoices you have for repairs you have made. Records reveal whether or not a car has been well-maintained and whether it only needs an oil change or whether it needs a service.


Keep receipts for every time you have work done on the vehicle. Even though you could overwhelm the new owner with paper, having too much is always preferable to having too little.


Avoid modifications: The bulk car modifications make cars less valuable to dealers. For specific segments of the private market or specialized purchasers, they might raise it, but for a dealership, it means more labour to remove such changes and look for damage.


It’s acceptable to make small changes, such as switching out the wheels or adding a little window tint. Body kits, spoilers, hood scoops, and other more radical alterations hinder the vehicle’s ability to be sold later on.


Keep mileage reasonable: It could be tough to reduce mileage if you drive or take a long commute to work. In all other circumstances, reducing pointless travel can help maintain its worth.


Low mileage vehicles are more valued since they typically have less wear and tear and last longer before needing more extensive maintenance to keep them on the road.


Repair damage quickly: Ding or scratch the car so you can see metal underneath? Get it fixed quickly. You can have it touched up by a professional for cheap or buy a touch-up pen for even less.


Never keep bare metal out in the open, especially if you live near water. Although galvanized steel, which is resistant to rust, is currently used in the majority of automobiles, the cost of repairing damage increases the longer it goes unattended. Click here to learn more about car repair loans.


Rust also spreads.


Choose a common colour: Though some of the more eccentric automotive colours may look fantastic, they are also specialized. You would be shocked at how big of an impact a car’s colour has on its worth, so keep that in mind.



Brighter colours may not have as much of a market as white and silver cars, which are perennial favourites.


Purchase a well-known brand: Purchasing a well-known brand of cars might have one of two effects. They may be so widespread that choices are numerous and values are kept at a low level.


They may also be common because they are well-liked and meet a specific need in the market. For typical cars, parts are inexpensive, and every auto shop is skilled in their repair.

Depreciation is a minor factor in a car loan but is still a consideration. You should consider it as well as the lender as it could influence your choice of car!
Thanks for reading! If you have any more questions about car depreciation in Canada, please don’t hesitate to send us a message.

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