- The latest number plate can be an impetus to upgrade your car, but is it really a good investment if it depreciates so quickly?
- Gold and silver don’t depreciate, so use the savings to invest for the long term.
LONDON, September 26, 2022: Cars rolling off the production floor this September will be first in line for the new 72 number plates. But as soon as you drive it off the dealer’s forecourt, the value of that shiny new car immediately falls by around 10%, losing up to a further 30% by the end of the first year. Is it worth the six months of bragging rights to lose thousands in the first hours of owning a new car? What else depreciates so quickly? More importantly what holds its value instead?
Every year in March and September new car sales surge as buyers rush to own the newest car on the market. But cars are notoriously depreciative. This means their value drops precipitously over the period of ownership and the price you paid for it is a far cry from what you might recoup if you sell it later on. According to the AA, the average car will have lost 60% of its value in the first three years of ownership, with up to 40% of that going in the first year alone. Of course, it depends on the type of car, the mileage and the upkeep, but ultimately depreciation is the biggest cost to drivers after fuel.
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Cars aren’t the only new purchases that quickly lose value. Wedding rings have an intrinsic value in the metals or gemstones within them, but the production costs and a retail margin are included in the shop price. As soon as you walk out the door the resale value falls by half or sometimes far more, because the margin and production costs can’t be recouped. Wedding dresses are a similar large purchase that will be worth far less on resale (even if it isn’t worn).
Electronics like computers and phones lose their value fairly quickly too as new technology usurps old. Resale website Music Magpie’s annual phone depreciation survey showed that some high-end phones can lose around 60% of their value by the end of a standard 24-month contract, while others can fall by up to 87%.
The common factor in most of these depreciative assets is that they are constantly being replaced by something better, faster, safer, or with more features. To save thousands in depreciation, you could buy a newish car (one to two years old), an antique wedding ring, or something that doesn’t depreciate at a value-destroying rate.
Non-perishable commodities like gold or silver have retained their intrinsic value for millennia. While a gold and diamond engagement ring will depreciate because of the retail markup, the physical gold and the diamond within it still hold a value linked to the market price of the commodity. Physical gold bullion, including coins and bars, have held their value for thousands of years. The price of the commodity may fluctuate, but over the long term the value continues to rise. If you’re in the market for a new car, consider buying nearly new and spending the 40% depreciation you just saved on some gold bullion.