Gap Insurance Counters New Car Depreciation?

Some cars lose their value more allot quicker than others. Depending on the model of car that you buy the new car depreciation effect can vary greatly. It's a fact of life, so what should you do? It is widely reported that by the end of the first year, the average car will loose approximately 40% of its value compared to the value at the time of purchase. But that does not mean that all makes and models of new cars will loose around 40% of their value in this time. Naturally this will vary according to market conditions and the model of car.

The more popular a model, the less likely the car is to loose quite so much of it's value during the first twelve months. Likewise the more exclusive a car the less likely it will be that such a car is going to loose value in the first year. An example of this is a one of a kind Ferrrari which can not be bought in the shops because sales are by invitation only! Seriously this is how it often does work.. There are fewer cars which will go in to production than demand. Such a car is the exception but it does exist and this happens fairly often with exclusive cars. Often highly priced collectors classics also go under the hammer for up to two hundred times the cars original value (This is a different thing altogether though!). More popular cars you and I would buy that would have a low depreciation rate during the first 3 years would be for instance a BMW Mini Copper S or a New VW Beetle when they first came out. These very popular models will possibly only loose around 10% to 15% of their value in the first year.

The AA are of the opinion that by the end of the third year the average new car could loose up to 60% of it's original value based on the average driver covering approximately 10,000 miles per year. What does this tell you about buying a new car? Be prepared to take some heavy financial loses in the first few years of ownership, or get a quality Gap Insurance policy and fight back against your cars depreciation.