There are different factors that influence your car's resale value such as the mileage, model, year of production, car's age and more. In this article, we listed down eight determining factors that may affect the resale value of your car. Read below to find out.
If you are trying to sell or trade-in your car, you’d want to squeeze as much money out of it as possible. But a little research may surprise you at how much or little your car’s market value actually is.
Cars are already notoriously known for being terrible investments because of depreciation, a measure of how quickly a car loses value, which is also the biggest cost of car ownership, accounting for more than a third of the average annual cost.
There are many websites that say your new car’s value declines as much as 10% the moment it drives off the lot, and that really isn’t an exaggeration. Though depreciation varies by car brands and models, as well as the geographical location, a car can depreciate by more than 20% after just one year, according to ezAuto, an automotive information and technology website and ecosystem.
You could be more accountable for the depreciation rate by knowing what factors influence it. (Image source: Zigwheels)
Your car will then continue to lose around 10% to 20% of its value each year for the first five years. By the end of the five-year period, your vehicle could be worth about only 40% of the price you originally paid for it! If you’re curious to find out how much your car is worth in today’s market, you can refer to this calculator by Takaful Malaysia.
We don’t deny that some cars have lower depreciation rates compared to others. According to iCarData platform, brands like Proton, Perodua, Honda, and Toyota, which covered approximately 81.9% or four out of five cars in Malaysia’s automotive market in 2019, have the best resale value in Malaysia.
According to the iCarData platform, these brands are able to retain a sustainable chunk of their original price tag because they offer superb value for money and are extremely reliable. In fact, they say, first-generation models of Toyota Vios or Perodua Myvi retain up to 30-40% of their original value even after 10 years of service.
Generally, Perodua and Honda have the lowest depreciation rates. (Image source: Carlist)
- Blue line: Perodua
- Grey line: Honda
- Yellow line: Toyota
- Orange line: Proton
The bottom line: depreciation is unavoidable, however, there are some things you can do to slow down the process. Conversely, there are certain factors that could accelerate the depreciation process and affect your car’s resale value.
In a country like Malaysia, where the used car market trades around 400,000 cars annually or about 66% of the new car sales in the country, according to the Malaysian Reserve, it is pertinent to understand what factors affect a car’s resale value. Let’s take a look:
1. The car make and model
The brand image of a car varies according to the region you live in, and may positively or negatively impact the resale price.
The power of branding is indisputable, and is the ultimate economic moat. Brand perception can easily be the main reason a car possesses inherently more value than others, and is a reason why a buyer chooses one car over the other, regardless of the condition and quality of the car. This factor may not be grounded in logic or facts, but is just a matter of perception and preference.
Other times, a brand that is considered more practical (i.e. efficient fuel consumption) would be more favorable. More prestigious brands that have a reputation for quality and reliability may be more trusted than lesser-known or unknown brands.
Like we summarised earlier, brands like Proton, Perodua, Honda, and Toyota are more commonly used in Malaysia, because they are perceived as more reliable by most Malaysians. We also found out that continental cars, however, are typically less well-received in the resale market in Malaysia, and have higher depreciation rates than Asian car brands. This could be because these brands may generally have more expensive parts that are difficult to source.
2. The car colour schemes
You risk not closing a deal if your car comes with eccentric colours, especially if the model becomes discontinued or would require additional money for the upkeep cost.
Though this factor is subjective, generally, a car with flashy, bright and striking colours like pink, orange, teal and bright purple is more difficult to sell compared to a car that comes in basic colours like black, white and gray.
Without a doubt, having your favourite colour for your car may be good for the eyes, but it could discourage people because of the additional cost it takes to maintain it. And generally, people tend to lean towards colours that are more commonly used in the market.
Thus, best to stick to the classic or basic colours to ensure that your car can be easily sold if you decide to do so one day.
3. Number of owners
This is pretty straightforward, but let’s admit it - even just at face value, a car with only one previous owner will be more attractive than a car that had multiple owners.
The concept is similar to owning other technological items like cameras, laptops and televisions; the longer it has been in use, the higher the wear and tear.
Similarly, a second-hand car’s resale value will always be lower than a brand new car. So don’t be surprised, if your used car’s resale value is extremely low.
Different drivers have their own driving styles, and some may be more aggressive than others, but either way, each leaves their own effect on the car, which over time, will result in some wear and tear.
If the car has been under multiple ownerships, it only makes sense that the car’s performance would have been adversely affected as well, and thus, decreasing its value.
4. The car’s interior and exterior conditions
This is a no-brainer but any damages to a car’s exterior, however slight, will have a negative impact on the resale value. Buyers prefer a good-looking car for very obvious reasons: it shows that the car is well-maintained and well-kept by the previous owner.
Likewise, if a car’s interior has an unpleasant odour, it will be harder to sell. Therefore, we believe it doesn’t hurt, in fact recommended, to keep your interior well-kept and maintained. Get professional help to repair any dings and dents, do a paint job to give it a new look as well as detail the interior and clean where necessary. Enhancing the interior and exterior of your car can help bring its value up, and help accelerate your sale.
But beyond prepping your car for a good sale, taking care of your car’s exterior serves more than just a cosmetic purpose - repairing small occurrences like scratches will avoid long-term issues like rusting and damage to the car’s body that could eventually affect the car’s overall performance.
Potential buyers may also be turned off by a car that is visibly worn out because it means they need to fork out more money to repair or enhance the car.
5. The after-sale maintenance quality and service records
Prospective buyers will want to know if a car's service centre has what it takes to take care of the vehicle. At the same time, they will likely want to see your service records as proof that your car has been well-maintained. Keeping all your service records in one place will come handy when you need to show it to the prospective buyer.
A well-maintained car has a higher resale value simply because it means the buyer is not required to spend more money on the repairs costs to cover wear and tear or rust.
Though most cars come with rust-proofing, this doesn't completely protect it from wear and tear and could eventually wear off. Investing some money for rust repairs on your car will pay off when selling it off.
Besides that, it’s fairly obvious, but another easy way to maintain the resale value of your car is to make sure your car gets serviced regularly on time.
All cars come with their own dedicated maintenance schedule, which is usually every few months or after a car has hit certain kilometers. It’s also important to send your car to an authorised workshop for your particular make and model.
Overall, buyers will have more confidence in paying a higher price when they see that the car has been well taken care of.
6. The car’s mileage
This is a good indicator of a car’s wear and tear. A car with high mileage means it has been used through and through and is less attractive than a car with low mileage.
Conversely, a car with lower mileage typically translates to higher resale value.
All things considered, though your car may be in mint-condition, this doesn’t necessarily guarantee a good resale value if your car has racked up more than 420,000km for example.
In fact, many if not all, market value calculators require mileage input as one of the data measurements before a resale value or market value can be determined.
7. A car’s age
Generally, an older car is less valuable compared to a brand new car, with the exception of a vintage or classic car. The latter is able to hold onto its value longer, if not increase - sometimes making it a valuable investment.
And unfortunately, used cars, particularly those aged between nine and 12 years old, are harder to finance - they either come with a massively high interest rate or it may be difficult to secure loans with banks.
Good news is the car insurance premium could be lower for used cars! Car insurance premiums are calculated based on many factors, one of which is the market value of the vehicle. Thus, a cheaper car (by nature of being used) would translate to cheaper insurance.
By the way, if you are on the lookout for car insurance or would like to renew yours, apply through us now to stand a chance to win a Petronas gift card worth up to up to RM300.
8. Modifications on the car or aftermarket accessories
Having high-end stereos, custom rims or other complex accessories may be visibly appealing and fun - but it may also be costly to you in the future when you want to sell the car.
This factor is subjective, depending on the modification, but certain state-of-the-art enhancements may negatively impact the resale value because potential buyers may not want to be responsible for the lucrative upkeep costs.
Our take is to just steer clear of add-ons, because they may even be dangerous to your car if they alter powertrain or safety equipment.
Honorable mentions - economic outlook and market conditions, supply and demand and insurance coverage
These factors may or may not have the biggest impact on your car’s resale value, but they could influence it.
Economic outlook is important because selling your car during a recession may not give you the best value compared to when you sell it during favourable market conditions. You may be offered for less despite your car being tip-top or in the best state just because economic conditions are less than rosy.
Supply and demand matters because if there’s a glut of similar cars on sale, then yours won’t really stand out compared to the rest. Granted you could get more for a comparable car that is in less favourable condition, but supply and demand does affect the value of your car at that point in time.
Lastly, though it’s not immediately obvious, car insurance has a slight impact on your car’s resale value. In an effort to save extra bucks, people often choose to go with the cheaper insurance, but that may not be the best idea if it leaves your car vulnerable on the road. So investing a little extra on insurance will indirectly impact the resale value of your car later on.
The value of your car will depreciate regardless, so try to salvage as much of it by being mindful of the factors that influence it
Depreciation is similar to taxes - you can't avoid it no matter what you do. But it’s worse in a sense that depreciation offers no value to you.
Understanding how depreciation works and what factors affect your resale value is crucial because it could help you save a couple thousands of Ringgit down the road - money that could be used for other investments or commitments. So we recommend you make the effort to understand ways to maintain or increase your car’s resale value.
We hope you found this article helpful!
Whether you are a first-time or seasoned buyer, the process of buying a car can be complicated if you don’t know the industry that well. The #BreakingItDown series is all about addressing this problem. Stay tuned for more content.