Buying a car is one of the biggest financial decisions you’ll make, second only to investing in property, and the right choice can help you save thousands.
But unlike houses, cars do not appreciate in value, but begin depreciating the moment you drive them out of the showroom. According to CarSwitch.com. a UAE platform for buying and selling certified used cars, a new motor can depreciate by more than Dh20,000 as soon as you take it home. In fact, the company estimates that depreciation accounts for over 60 per cent of the annual cost of owning a car.
So which cars depreciate the least?
Using data from 2,500 sellers on its site, the company analysed the value of a car when it was new, the current year, the model and the selling price. Using that information, it then found the average for how much each model had depreciated. The top five cars for retaining their value in the UAE are:
1. Nissan Patrol
2. Honda Accord
3. Ford Edge
4. Toyota Camry
5. Toyota Land Cruiser
* Top 10 list is in the picture above.
What CarSwitch.com found in its research is that depreciation is a bigger deal in the UAE than in other markets. On average, residents here drive their new cars for five years, while owners in the UK and US hang onto their cars for more than seven and 11 years, respectively.
Another interesting element from the research is that resale values differ between brands, with a car’s depreciation rate varying between 30 per cent and 50 per cent after three years. But it appears you won’t go wrong with Japanese-made motors.
Most of the cars on the top 10 list were Japanese makes with the Nissan Patrol LE Platinum topping the list by retaining the most value. A 2013 Patrol bought for around Dh230,000 is worth around Dh170,000 today — that’s a value retention of about 75 per cent.
No German cars made it to CarSwitch’s top 10 list and the Ford Edge is the only American car to make it with a retention value of 65-70 per cent.
Five tips for beating depreciation:
• Don't buy new
Cars lose about 1.5 times more value in the first year compared to subsequent years. While a car will lose 20 per cent of its value in the first years, the depreciate rate falls to 10 — 15 per cent after that. So, it make financial sense to buy a one to two-year-old car to skip the initial loss.
• Mileage isn't an issue
In the UAE, cars cover 20,000 kilometres per year on average. However, your car’s age plays a bigger role in determining its value than its mileage. For example, a 2013 Nissan Patrol with 100,000km has approximately the same value as a 2012 Nissan Patrol with 60,000km. So, drive your car as much as you need to.
• A car's condition is key
After age, the condition (accidents, service history etc) the car is in is the next biggest determinant of a car’s value. CarSwitch says it sold a 2014 Hyundai Santa Fe for Dh50,000 and another for Dh60,000 because of the difference in the condition of the cars. So if you are about to sell, enhance its value with some cosmetic repairs and a good clean.
• Only buy a fully inspected car
If you are buying second-hand, make sure that you haven’t overlooked a major fault. Get the car fully inspected by a dealership or one of the local garages.
• Hang onto your car for longer
If you car is in good condition, keep it as long as you can. By trading up after a few years you begin the depreciation cycle all over again.