How To Calculate Car Depreciation Value?

What all is included in car depreciation?

The value would depreciate depending on how old the vehicle is. It is calculated for a range of zero to 5 years. The deal is done between the owner and insurer for the coverage when it is above that. In this, it is important to check the details of car components that help in the correct decision of the car's depreciation value. When unable to decide on the right option, it is better to get help from experts.

Car elements that impact the depreciation value

The factors in determining the final value are the paintwork, glass components, fiberglass material, rubber parts, tyres, batteries, airbags, plastic, and nylon parts. Other than this, you can check with the insurance policy as to components that impact the final value and coverage that one would get.

Some other factors are listed below:

1. The age of the car

The age of the car would tell you a lot about its physical condition and help in the calculation of depreciation as well. The older the car, the lesser will be its market value.  

2. Level of Maintenance

If you can maintain it good, you can expect to get a high rate on depreciation value. If the owner has maintained it well, he can expect less depreciation value and, therefore, benefit when selling the car. A poor exterior will result in a high depreciation value. 

1. Number of car owners

The fewer the owners, the better it is for the impact of depreciation on the value. It would also determine the condition and actual age of the car.

2. Fuel efficiency level

The level of its fuel efficiency also matters and impacts depreciation value. It should be a cost-effective one to get a good resale value.  

3. Model of car

If it is an outdated model with a scarcity of car parts availability and fewer mechanics to service it, it impacts the value. If it is among the latest and popular models, the depreciation value would be high. Moreover, luxury cars have higher value than smaller ones.

What is the calculation method for depreciation value?

Cost of running car X (number of days owned/365) X (100%/effective life years of car) = lost value

Here the depreciation is calculated on the fixed percentage of the actual cost of the vehicle.

Diminishing value for depreciation calculation

Value of car at the time of purchase X (Days of use / 365) X (200% / Effective life years of the car) –It will mainly give the vehicle's base value.

How to minimize the chance of car depreciation?

1. Maintain the vehicle

If you can maintain the car in the best way with its routine servicing, it will minimize the depreciation quotient. It is better not to do any modifications to the car as it can be difficult to sell it off and get a good value.

2. Buy model with high resale value

Try to choose a car model that would give high resale value even after years. It is better to do thorough research to invest in the right model. This would help avoid high depreciation of the car.

3. Get zero depreciation

You can opt for zero-depreciation cover in car insurance coverage to make it easy on your pockets. When unable to decide on the right one, ask for the details from the expert in the field. The person can guide you to invest in the right insurance cover for suitable returns.

Therefore, these are some of the ways in which you can reduce the depreciation value. With this, you can also expect to get good resale value.

The Final Part

When planning to invest in a new car or sell the existing one, the depreciation value is important. It would help you decide on the right budget and get suitable returns from it. The estimated resale value of the car is an important thing to consider. Try to know which elements to consider and it will help you take an informed decision. 

Though an abstract concept, it shows the car's real value at a given time. Timely maintenance and investing for the updated model can help one get suitable returns from it. You can approach experts to help you with the right estimation of the value.