There are a lot of reasons you might be curious about what determines the value of your car. For example, maybe you’re planning to trade it in or sell it outright. Maybe you’re dealing with insurance on an issue.
All new cars lose value as they age, but some more so than others and faster than others. There are a lot of factors that are going to play a role in the predicted and the actual resale value of your vehicle.
These factors then influence what a dealer or individual buyer is willing to pay.
There are factors that are specific to your vehicle, and then there are factors outside of your control, and we break some of these down below.
1. How Well You Maintain Your Vehicle
There are a lot of things you can do to extend the lifespan of your vehicle and increase its possible resale value.
Maintaining your vehicle is critical. You might go as far as getting auto paint protection, making sure you always park it in the garage and getting the oil changed regularly. To maintain a car, you also need to get regular servicing from a professional and ensure the tires are properly inflated.
Even how you drive can impact how well-maintained your vehicle is and its resale value.
For example, if you’re an erratic driver who’s constantly accelerating and rapidly braking, this puts more wear and tear on all of the components of your vehicle, and you might see a diminished resale value as a result.
Exterior factors that can diminish the value of your car include dings, chips, scratches, and visible rust. A car that’s visibly got a lot of wear and tear is going to see declines in the value of anywhere from 15-30% compared to a car that’s in good exterior condition, and this doesn’t even yet factor in problems with the interior or mechanical issues.
The interior condition is relevant, so you need to make sure it’s clean, and if you’re going to sell your car, you might even find that it’s worthwhile to reupholster seats with damage if the vehicle is newer overall.
You can easily calculate the financial impact of vehicle wear and tear, theoretically. For example, if it would cost around $2,000 to replace your car’s transmission and you don’t do it, go ahead and drop its resale value by that much. Of course, things aren’t always this cut and dry, and there’s no guarantee a potential buyer is going to do their own calculations or come to the same conclusions as you.
A poorly maintained car is just overall going to depreciate faster than a car that gets regular upkeep and maintenance.
If you do plan to sell your vehicle at any time, keep records of all your services.
2. Accident History
When a car has been in an accident, or even worse, it experiences a flood, it’s going to sell for less.
People can easily use companies like Carfax to find this information, so you can go ahead and count on even an individual buyer knowing what your car has been through.
A serious accident, even if you’ve had your car fully repaired, can reduce your resale value by around 10% compared to a similar car that hasn’t been in an accident.
Of course, you probably know that mileage is a big factor in the resale value of your car. Even if your car has no history of accidents and you’ve impeccably maintained it, if it has a lot of miles showing on the odometer, it’s going to sell for less than an identical car with fewer miles. Just driving less is one way that you can retain the value of your vehicle.
While condition and mileage are two terms we often talk about hand-in-hand with one another when it comes to vehicle value, mileage is something you can see right in front of you, while condition is a lot more subjective. The condition has a close association with mileage but not a direct correlation.
Even when a vehicle has low mileage, it can have a lot of wear and tear, negatively impacting value.
4. Vehicle Make, Class, and Body Style
Certain vehicle makes are going to have a better reputation and be known for their longevity compared to others. That doesn’t necessarily mean the reputation is actually in correlation with the quality of the vehicle. It can depend because, for example, Japanese cars like Honda and Subaru aren’t considered luxury brands, yet they often do very well in their resale value.
If a car is seen as being very reliable, that’s going to help its resale value. However, if a brand is one that’s seen as highly popular or has an overall great image, that can also improve the value, relatively speaking.
The class and body style will also affect your resale value.
If you live in a warmer location, a sports car is going to do better than it would in a colder climate. In a cold place or one with rough terrain, then four-wheel drives are probably going to have a better resale value.
Fuel economy is important here too. A car that’s more fuel efficient will probably better hold its value when gas prices are high as they are now. When gas is cheap, less efficient vehicles that have better safety ratings and more cargo space may do better in terms of their resale value.
Personalizing a car too much or adding aftermarket parts can actually end up hurting its value.
For example, if you’re going to add rear spoilers or wheels that are oversized, this can diminish your car’s value.
Anytime you do an aftermarket modification, a buyer isn’t going to know how well the work was done, and they might worry that it’s not high-quality.
There are also a lot of issues with clashing personal preferences that can come into the equation.
Your car’s exterior is something else to think about. It’s not a huge impact, but more common car colors are going to sell faster than wilder or more exotic colors.
6. Economic Factors
Finally, the economy and overall market are going to affect your car’s value. Right now, the used-car market is actually very strong, but that may not last if we head into a recession. Usually, when there’s a major economic downturn, there’s also a downturn in used vehicle values.