Depreciation: The Cost That Quietly Outspends Your Fuel Bill

Fuel is the running cost drivers complain about most. It is visible, it changes every month and it is paid in cash at a forecourt. Depreciation is the opposite: silent, gradual and settled in one lump on the day you trade in or sell. Yet for most new cars, the value lost over the years of ownership comfortably exceeds everything spent on fuel over the same period. Understanding how it works is the first step to spending less of it.

What depreciation is

Depreciation is simply the difference between what you paid for the car and what you get back when you part with it. Spread over the months you own the car, it becomes a monthly cost like any other, just one that never appears on a statement. The curve is steep at the start and flattens with age: a car loses value fastest in its first couple of years and more slowly thereafter.

Why some cars hold value and others do not

Resale value is set by the used market, and the used market rewards predictability. Models with a reputation for reliability, cheap and available parts and strong demand from second and third owners hold their value well. In South Africa that has long meant double-cab bakkies and popular compact SUVs and hatchbacks from mainstream brands. Rare models, unusual colours, heavily optioned variants and brands with a patchy reputation for parts or support tend to fall faster.

How many were sold new matters too. A car that sold in large numbers has a deep pool of used buyers who know exactly what they are getting. Specification plays its part as well: the mid-range variant with the popular engine and gearbox tends to find a buyer faster than either the stripped-out base model or the fully loaded flagship, because it is what most second owners are actually looking for.

The levers you control

You cannot stop depreciation, but you can slow it:

• Choose a model and specification with a proven resale record, in a popular colour.
• Keep every service on time, at the recommended intervals, with the book stamped.
• Look after the bodywork and interior; small damage adds up at valuation time.
• Keep the mileage reasonable for the car's age.
• Keep the car for long enough to get past the steepest part of the curve.

The lever most people overlook

Depreciation is measured from what you paid, not from the list price. The car's future value is set by the market and is the same whoever sold it to you. So if you pay less at the start, the gap between purchase price and resale price is smaller, and your depreciation is lower by exactly that amount. It is the quietest saving in motoring, and the one with the least effort attached.

That is the logic behind the Car4Less price. Every new car in the showroom is offered below the manufacturer's retail price, delivered brand new through the franchise dealer network with its full warranty. The car is the same; the starting point is lower, so both the interest over the finance term and the depreciation at the end are smaller.

Putting it in the budget

When you compare two cars, estimate what each will be worth after the years you expect to keep it. Used listings for three- or four-year-old examples are a reasonable guide. Subtract from the purchase price, divide by the months, and add the result to fuel, insurance and servicing. It changes the ranking more often than you would think. Remember, too, that the figure you get on the day depends on how you sell: a trade-in is quick and convenient but usually below what a private buyer would pay, while a private sale takes more effort and brings paperwork such as a roadworthy certificate. The Car4Less resale value guide covers the topic in more depth.

• Guide: resale value explained →
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