What Is Car Depreciation?

Worried about depreciation? Our guide to car depreciation helps explain what car depreciation is and what is its relevance to leasing.

Depreciation is an unfortunate effect when it comes to owning a car. Whenever you purchase a vehicle, you have to contend with depreciation if you want to sell it on later down the line - do you need to worry about car depreciation with leasing?

What Is Car Depreciation?

To put it simply, car depreciation is the difference between the initial value of the car at brand new and the value of the car when it is sold (or its residual value).

The reason why cars depreciate is because of how much they are used during their life span. Cars are bound to develop wear and tear as they are used due to potholes, bumps, stones etc which appear on the roads. Depreciation also occurs because new models are always being released so a few years down the line, your brand-new car most likely won’t be the brand’s latest version. This depreciation is the same with any other type of expensive item you pay for like mobile phones.

Not all cars will depreciate at the same rate. The quicker depreciating cars are your brand new vehicles and cars that have a low demand in the market. The cars that depreciate slower are the ones that are fuel-efficient and are more affordable as these types of cars will hold their value for longer.

What About Car Depreciation with Leasing?

When you are leasing a new vehicle whether it be a car or van, you do not need to worry about how much the car will depreciate as, at the end of your contract, you simply hand back the vehicle and are free to lease another one. The finance company are the ones who own the vehicle, and it is up to them to sell it in the future.

Any Questions?

If you have any further questions about car depreciation and need to understand it a little bit more, don’t be afraid to get in contact with us. You can give us a call at 0345 350 3776, email us using enquiries@willowleasing.com or send us a message on our live chat service!