Car Depreciation: How Much Value Does a New Car Lose?

The saying goes that a car loses value the moment you drive it off the lot. But how much value is that? And what about a year or two, or three, later? While predicting the exact depreciation your car will experience isn’t an exact science, it is almost guaranteed that there will be some depreciation. In fact, a 2017 Study found New Zealand had the highest level of car depreciation in the world!

Canstar takes a look at what factors impact depreciation, and how you can minimise depreciation on any new car you buy.

In this article we cover:

What is depreciation?
How much do cars depreciate?
What factors impact depreciation?
How to minimise depreciation

What is car depreciation?

Depreciation simply means a decrease in value over time. Even if a car is kept in great condition, as it ages it loses value simply because it is getting older. In addition, there are a range of other factors that can lead to higher or lower rates of depreciation.

Cars are not the only assets that suffer depreciation. As most things age they depreciate. Just think, how many items can you resell for a higher price than what you paid new?

Do all cars depreciate?

Almost all cars depreciate in value. And, most likely, any car you purchase as a family runaround will suffer from depreciation.

Typically, the only real exception is collector cars. Old models of Ferraris, Lamborghinis and other classic cars can appreciate in value. But even then, it is mainly limited to certain models that have been kept in pristine condition.

So unless you have a car that’s garnered a cult following among wealthy car collectors, depreciation is likely unavoidable.

How much does a car depreciate?

As we’ll get to below, not all cars depreciate by the same amount. There are a lot of factors that can impact depreciation. And, at the end of the day, depreciation is impacted by how much someone is willing to pay for your car. It’s not a set figure.

So while we can try to estimate how much a car depreciates, or look at the average price a car sells for second-hand, it’s very difficult to set exact depreciation figures.

However, depreciation is generally scaled with the original price paid, so the more expensive a car, the more you’ll lose to depreciation.

As a generalisation, you can expect your vehicle to lose around a third of its value (or more) during the first three years of ownership. The rate of depreciation then decreases after that period.

If your car is sought after, (for a range of reasons we’ll cover below) it’ll likely depreciate less than other similar models.

Not all cars depreciate the same: factors to consider

Once you’ve accepted that your car is most likely dropping in value by the day, you can start thinking about what factors impact depreciation, and how you can help minimise it.

New cars

Buying a brand new car in New Zealand can cost you a lot in depreciation.

For starters, a brand new car becomes a used car the moment it leaves the lot. As a result, it depreciates by 15% the moment you buy it due to the GST component of its asking price. And then, by about another 10-15% in the first year. That’s a 20-30% loss in value in the first year alone.

That means a $50,000 new car could be worth just $35,000 after only one year…

The level of depreciation slows down as the car gets older, as long as you maintain it. And not all new cars will suffer depreciation this high. But the fact remains, brand new cars are hit by the highest levels of depreciation.

Fleet cars

Many new cars in New Zealand are sold to fleet car businesses, such as rental car companies. Because these companies buy in bulk, they receive substantial discounts on the price of the cars they purchase. This means a few years down the line, they can afford to resell them at a discount, too.

So come time to sell your car, if it’s a model that’s popular with bulk car buyers, you may find yourself pitching your car against a large number of similar, cheap ex-fleet cars. This could bring down the resale price of your vehicle and could contribute to higher depreciation.

Not to mention the general stigma that often follows popular rental cars marques, making them less desirable to a lot of consumers.

Car class

SUVs are all the rage here in New Zealand. So it follows that there is also a bigger resale market for them. Even Kiwis looking for smaller cars tend to go no smaller than a compact SUV or crossover. Sedans are well out of fashion.

Colour

When considering depreciation, you not only have to consider the resale value but how likely it is to sell. Sure the car might be worth $20,000, but you still need to find someone willing to buy it. A strange colour choice will reduce your pool of willing buyers.

You may like a standout hot-pink car, but a simple black, silver or white car will almost always be easier to sell.

The car’s reputation

Whether justified or not, some cars simply have a better rep than others. Here in New Zealand, we love Japanese cars. They’re seen as cheap, reliable, familiar, and easy to fix. On the other hand, we’re less familiar with a lot of European models, and many Kiwis are more hesitant to buy these.

Opting for a car with a good reputation and familiarity could make resale much easier.

Kiwis are big consumers of utes and family friendly SUVs from brands we know and trust (thereby increasing their perceived value and minimising their depreciation). So while it’s hard to say for certain, you can assume that a Toyota SUV will probably depreciate less than a Peugeot hatchback. Simply because more Kiwis are likely to be in the second-hand market for the former.

Furthermore, not all releases of the same model are equal. Car manufacturers constantly update and re-release their most popular models. To varying degrees of success. And newer isn’t always better. A 2020 model may have been a smash hit and thus have great resale value. While a newer 2022 model could have been riddled with design flaws and be less popular.

It pays to not only research makes and models, but years, too.

The hard to measure

The fact is, vehicle depreciation isn’t a straightforward or easy thing to measure. And there’s not a heap of data laying about to accurately track the resale value of popular car models. This means despite the above advice, it’s by no means a car depreciation bible.

For example, the Toyota Rav4 is a popular fleet car, which we said is best to avoid. But it’s also a popular brand, and vehicle class. And is efficient to drive. This points to it being a good car with less depreciation.

And, of course, you can’t forget the Suzuki Swift. A wildly popular small car that defies trends here in New Zealand. Despite being an unpopular vehicle class, and having plenty of competition from cheap second-hand imports, new Suzuki Swifts tend to hold up fairly well in terms of depreciation.

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How to minimise depreciation

The best way to minimise depreciation is to do what you can to combat the above points. One of the best ways is to avoid buying a car brand new, as this is where you get hit with the steepest deprecation. By buying a car just one or two years old, you avoid the off-the-lot price drop, while still getting a car that should look, feel, and drive new.

Some other steps to minimise depreciation could be to:

• Avoid cars popular with rental companies – not only can this avoid rental car stigma, but you won’t be competing with rental companies flicking off vehicles for cheap.
• Choose a popular vehicle class – such as SUVs and crossovers.
• Pick a safe colour – nothing too out there, both inside and out.
• Choose a car that is seen as reliable – Mitsubishi, Toyota, and Nissan, all have long-standing histories in New Zealand and Kiwi consumers are familiar with them. These may be better choices over lesser-known European brands.

Some steps you can take to minimise the depreciation of your existing vehicle include:

• Look after your car – keep it clean and tidy, keep it serviced (and keep service records) and repair any damage.
• Keep the car for longer – spread over 10 years, steep depreciation is less of a factor, but expect increased maintenance costs.
• Drive less – cars with fewer kilometres hold their value better.

Do your research

If you’re looking at buying a new car, search around to get as much info as you can. One great way to measure depreciation is to keep an eye on second-hand sales on sites such as TradeMe, and to compare them to the sticker prices of those vehicles.

This can give you an idea of how much these cars are losing in value.

Another great way to minimise depreciation is to get a great price on your car purchase. If you pay too much for the car, you’ll be hit harder by the loss of value come resale.

And as most new cars in New Zealand are bought using a car loan, it’s important you get the right loan at the cheapest price. And that’s where Canstar can help. We compare personal loan providers, to help you get the best loan. Check out the table below, or click the button to compare all the personal loans in our database.

About the author of this page

This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.