Develop an appreciation for depreciation

Mazda Advertising Feature

22 Sep 2022

It’s not going to be a surprise to you that electric cars cost a lot less than the equivalent petrol and diesel models to run. Your fuel costs will be about a quarter of what you are used to, the servicing is cheaper, and you’ll be taxed less too.

But the biggest cost for most drivers is actually likely to be depreciation. This is the amount which your car will lose as it gets older and you use it, and although you will struggle to find figures anywhere it is likely to be more of a cost than your fuel and servicing put together. 

As you would expect, the value of a car will decline steadily as it gets older and more miles pass under its wheels. The amount it is worth when you come to sell it or hand it back is called its residual value.

Mazda MX 30 sport tech electric car Electric cars are cheaper to run - but you need to choose wisely to avoid other costs

This is usually referred to as the RV and is something which any new car buyer should bear in mind, but it is especially important for the majority of us who will use finance to fund a new car purchase. 

This is because the most popular types of car loans are leasing, PCP and PCH. These all mean you will never actually own the car, and the payments you make cover the depreciation and the interest on the loan. Since you are paying for the loss of value over time, a car which holds its value better will cost you less per month.

Ginny Buckley with Mazda MX 30 sport tech electric car at Gridserve Ginny checks out the MX-30

How does that work?

Let’s say you buy a car which costs £30,000. Instead of financing the whole amount, you can just pay for the value the car will lose in its time with you.  Let’s assume it’s predicted that the car will be worth £15,000 after three years and 30,000 miles, then your finance payments will cover the £15,000 drop in value rather than the whole amount. If we ignore the deposit, interest and other fees for the sake of simplicity, that would work out at £417 per month. 

However, a rival car also costs £30,000 but doesn’t hold its value as well. It’s predicted to be worth £12,000 after the same time period, so your payments will have to cover the £18,000 drop – that’s £500 per month. Find a car which holds its value better and you’ll pay less.

It means you can often afford a far more desirable car than you think, because used car buyers will think it is desirable too and it will be sought-after when you are finished with it, keeping the values high.

For example, the new Mazda MX-30 SE-L Lux is predicted by industry experts at CAP HPI to be worth 55.3% of its new price after three years and 30,000 miles, which is unusually high for its class. This means it may well cost less to buy using finance than other less desirable rivals. If you are one of the rare buyers who uses cash to buy a car, it means it will be worth more when you come to sell so your investment should be safer.

Mercedes C Class plug in hybrid vehicle The MX-30 holds its value well, according to industry experts

But how can you predict what a car will be worth in the future?

No one can be sure what the value of a car will be in three years or even longer, but the industry employs professional ‘crystal ball gazers’ who make predictions based on a variety of factors. Some of these are external factors such as predictions around the economy or new laws such as the 2030 ban on sales of new petrol and diesel cars. 

However the biggest factor is how attractive it will be to future buyers. The experts will consider the image and reputation of the brand, the performance of the car, running costs and the likely supply and demand. If a company is forced to offer big discounts to shift stock of a car when it is new, the residual value will take a hit.

Mazda’s MX-30 is seen as desirable thanks to its combination of stunning, small SUV looks, practicality and driving dynamics. Add in the low running costs of an all-electric powertrain and the restricted number which will be sold in the UK and it is enough for the experts to predict that the MX-30 will be a solid investment compared to rivals.

Mazda MX 30 sport tech electric car interior dash Good looks, practicality and rarity will keep values high, say the predictors

​Doesn’t that mean that I’ll have to pay more to buy the car in three years’ time when my finance ends?

Yes, as the MX-30 will have a higher value you will have to pay more if you want to settle the finance on it or buy one as a used car. But its desirability will ensure that it is likely to hold its value as the car get older too, especially as more British drivers make the switch to electric and the charging infrastructure improves.  

If you'd like to experience the highly-valued MX-30 for yourself, book an appointment with your nearest retailer by clicking here.  

Mazda MX 30 sport tech electric car charging at Gridserve Improving charging infrastructure will ensure the enduring appeal of used electric cars

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