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How Does Car Value Depreciation Work In Grimsby?

How Does Car Value Depreciation Work In Grimsby?

Car value depreciation is a core consideration when looking at car loans and is the subject of today’s blog post. Our Grimsby auto loan team often field questions around depreciation and whether there is an equation or algorithm for it.


There isn’t. Depreciation has many factors that influence how much and how fast the value falls.


What is car value depreciation?


Car value depreciation is the loss in value a car experiences over its life. New cars experience more depreciation early on but used cars will also depreciate.


Depreciation is essentially the difference between the price you paid for the car and its current value. Any difference, which is almost always downwards, is depreciation.


Depreciation is important for two reasons:


One, auto loan LTV, Loan to Value. You buy a new car worth $45,000 with a Grimsby car loan worth $38,000. Initial depreciation within the first year could be anything between 15-40% and could mean the amount outstanding on the loan is actually higher than the value of the car.


Two, when you trade in or sell the car to make up a down payment for a new car loan. You’ll need to find out the value of the car to work out how much it could raise.


How does car value depreciation work?


Car value depreciation depends on the manufacturer, make, model and trim level.


Some cars and car manufacturers are more desirable than others. Therefore, they can command higher prices, so depreciation is slower.


Others are less desirable, so lose value faster. There is no set value for this, it’s all down to market forces.


Here are some of the primary influences over depreciation:


Make and model – Some makes and model of car are more sought after than others. Demand helps cars retain their value better than cars less in demand.


Vehicle trim level – Base model cars don’t have the extra features we look for so are worth less. Higher trims with more technology and features are more desirable so depreciate slower.


Mileage – The more miles the car has driven, the less it is worth. This partly down to wear and tear and partly down to how we emotionally value cars. We consider fewer miles to be better, so will pay more.


Vehicle condition – If a car is in excellent condition, it will be worth more than one in poor condition. This is true whether you’re selling privately or are part exchanging.


Service history – If a car has a service history, it should have been well maintained, so can depreciate less than a car without a service history.


There are other influences such as running costs, CO2 emissions, safety tech, safety scores, colour and others but they have less of an impact on depreciation than those listed above.


There is no defined rate or cost to depreciation so it can be difficult to assess. The easiest way is to check the values of similar cars on the open market or by using Kelley Blue Book.


If you need help with anything to do with auto loans, contact our Grimsby car loan team today.


We will use all our skill and experience to deliver the lowest possible Grimsby auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.


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