Is your used car holding its market value?

The rising cost of motoring can be a big strain on your household finances. Many of us are becoming increasingly savvy about keeping the bills down on a day-to-day basis, or staying within our monthly budgets, but we also need to remember to be savvy in the longer term. There’s more to it than finding cheaper petrol.

Why? Because your car isn’t just something that gets you from A to B. Beyond the everyday functionality, your car is also a ‘big ticket’ item, an asset. According to recent research from CAP, the free used car valuation site, at least a third of us overestimate how much our cars are currently worth. This could be an issue when you come to re-sell, as you might have to make up a significant financial shortfall that you hadn’t planned for.

Most of us have heard that a brand new car loses a significant proportion of its value the moment it’s driven off the garage forecourt. That’s a large part of the reason why so many money-aware people prefer to buy second hand cars instead. However, simply buying a used car isn’t the whole answer either, as some models hold their value much better than others.

Financial issues to consider when buying a used car

· Is this car fairly priced? (again, a car valuation service will be useful here)
· Is this car cheap / easy to maintain and insure?
· What are the likely running costs, including petrol consumption?

It’s also important to ask yourself: “Is this model likely to drop excessively in value in the long term?” Looking at the big picture, where your car is an asset, the savings potentially made with fuel efficiency and cheap maintenance could be completely wiped out by a rapid depreciation in its resale value. While it’s important to keep an eye on your monthly outgoings, it’s also good to remember to consider the likely future financial situation.

There’s a lot you can do to protect your car’s value. For example:

· Buying the right model to begin with
· Regular checks and maintenance
· Not putting off getting the car serviced
· Keeping mileage low if possible

The Citizens Advice Bureau has impartial advice about buying a used car, as part of its recent Check It, Don’t Regret It campaign. This includes some handy checklists, and advice about avoiding scams.

Full disclosure: This article is being supported by CAP. Article written by Penny Golightly, and there has been no editorial interference.