What dictates the value of your car
You’ve probably heard a thousand times that something is worth only what somebody will pay for it, but what dictates how that figure is set? Why is one car worth £500 and another 10 or 100 times as much?
It’s down to a multitude of factors but at a simple level a car’s value is driven by the balance of supply and demand along with its original selling price. So if it was expensive to start with and very sought after, it will continue to be valuable – but if there’s little demand for it, its value will quickly drop. Conversely, if a car is cheap to start with it’s unlikely to become more valuable, so will always be worth relatively little.
For more on car depreciation and residuals check out our blog on the subject. In the meantime, these are the key things that will affect your car’s value.
Arguably the thing that makes the biggest difference to your car’s value is something that’s subjective and driven at least partly by reputation. In the UK we like our premium marques whereas mass-market products aren’t so highly regarded. As a result we’re happy to pay a higher price for a car from an upmarket brand, even if the car isn’t as reliable or such good value as a cheaper alternative. Sometimes a car doesn’t have much of an image because of limited awareness through a lack of marketing – and it’s these that can make the best used buys.
If you’ve got a mainstream car to sell, one of the things that will make the biggest difference to its value is its condition. If it looks abused nobody will want to buy it – why would somebody buy a car with grubby paintwork and stained interior trim when they can find a better example elsewhere? Buyers will pay a premium for a car in immaculate condition and the same goes for one that’s covered a low mileage and comes with a full service history.
Having the wrong engine can make the difference between a car being really enjoyable to drive and not very much fun at all. Modern small-capacity turbocharged petrol engines are generally more fun to drive than bigger non-turbocharged units and they’re more efficient too which means lower road tax and fuel bills. The wrong type of fuel can also be the kiss of death; a large MPV or SUV with a petrol engine will be worth pretty much nothing because these types of vehicle will sell only if they’re fitted with a diesel engine.
Until relatively recently many automatic gearboxes were pretty clunky, especially those fitted to cars with a small engine. As a result, buyers tended to favour a manual gearbox. But modern transmissions are much more slick, especially the dual-clutch items that now proliferate. And with traffic jams now the norm whether you’re in town or on the motorway, cars with two pedals are more popular than ever. However, automatic gearboxes tend to be less reliable than manuals and some of these transmissions are still far from slick, so there’s no hard and fast rule. Besides, the type of car is also important. A luxury car with a manual gearbox will prove hard to sell but a sportscar is less likely to have a following in auto form.
Cars used to be offered in a choice of wild hues including bright greens, reds, oranges and yellows. The modern sales brochure often features a colour palette that takes in black, white, silver and grey but little else. Designed with conservative buyers in mind you can’t really go too far wrong with a sportscar, luxury saloon or supermini in these colours, whereas a lime green limousine wouldn’t find a buyer too easily. So while the type of car makes a big difference (sportscars in bright colours will usually have a following), some paint and interior trim colours can make a big difference to how much a car is worth.
Virtually all cars lose value as soon as they’re registered. The norm is for a car to lose a big chunk of value pretty quickly then the rate at which it depreciates slows down. It’ll hit rock bottom at some point, usually after 10-15 years and it’ll sit there for a while, potentially forever. However, it’s not unusual for values to pick up again once a car has become rare, especially if it becomes sought after. Hot hatches from the 1980s are a case in point now; there are few really good examples left but older buyers on a nostalgia trip want iconic machines like the Peugeot 205 GTi and VW Golf GTi Mk1 which for years were worth almost nothing. Not any more.
The higher a car’s original selling price, the further it has to fall. However it will do this only gradually, so an expensive car will automatically be worth plenty in the early stages of its life and depending on the other factors here it’ll get more affordable as time goes on. After a few years though, an expensive car that’s not very sought after will be worth less than an older, cheaper car that’s got a keen following.
Most mainstream car makers offer a mind-bendingly wide range of trim levels and options. Take some of the premium brands for example, where it’s not unusual for their cars to come with leather trim and an impressive mutimedia system. But despite this it’s still possible to spend thousands of pounds on softer hide or extra-special sound. Poverty-spec cars will always be worth less than those with extra kit but which segment the car sits in will also make a difference. An executive car without sat-nav might be hard to sell but a supermini buyer wouldn’t expect such equipment to be fitted.