Trying to avoid depreciation on cars may sometimes seem like trying to hold back the tide. Depreciation is the major expense in car ownership and it certainly makes sense to attempt to minimise its impact.
The decrease in a vehicle's value over time needs to be tackled from three directions:
The first way to minimise depreciation is to pay the lowest possible price for the car in the first place. Always negotiate a discount, even if you simply buy your cars at the nearest main dealership.
It may be worth shopping around for the best deal, not just from the franchise operators all over the country, but also among dealerships abroad. Check prices on internet car sales sites too.
This can be a time-consuming and specialist operation. Unless your company has a fleet specialist on the books, it may pay to consult car brokers and vehicle importers.
There is another option to consider here – buying nearly new vehicles. Brokers and importers may be able to help with this process, which can mean big savings in initial costs, though this could be cancelled out by the extra time and trouble involved if attempted in-house.
A final point to make here is the difference in depreciation between different makes and models. Consult motoring magazines and price guides to compare the predicted residual values of competing cars. There are big differences and it makes financial sense to buy the lowest depreciators.
There are certain actions to take to minimise depreciation during ownership. Although there are “book prices” in the motor trade for every vehicle of every age, there is leeway within this system. A superbly maintained car will command a higher price than a poorly-maintained, scruffy vehicle.
So, pay attention to repairs and maintenance. A full dealer service history is the highest accolade a used car can boast. Impress on owners the need to keep cars clean and well maintained.
Length of ownership and mileage is also relevant here. There will be a trade-off between the convenience of keeping the vehicle as long as possible and the greater resale value of disposing after one or two years. Again, consult the car price guides.
Selling the company car is as important as buying. Obviously you have to try to minimise depreciation by securing the highest possible return.
This process usually involves a trade-off between convenience and efficiency. The easiest way to sell company cars is through an auction or selling back to the dealer source.
These are likely to give the lowest return on the cars. Consider also the higher prices possible from selling the vehicles privately or the bargaining power they can command as trade-ins for replacement cars.