You won’t get anywhere in the business world by making frivolous expenses. A car is a significant purchase for any young entrepreneur, but one that is often seen as a necessity. Not only is it your means to get from A to B, but, in a profession where first impressions count more than ever, a respectable executive car is often seen as a business requirement.
How Depreciation Works
Cars are usually seen as risky investments because almost all of them will suffer from depreciation at one point or another. While the exact figure will vary between different makes and models, generally a new car will have lost 40% of its original value by the end of its first year on the road. By year three, this will be around 60% assuming you have a typical annual mileage.
Oftentimes, luxury manufacturers like Audi, BMW, or Mercedes will hold their value better than cheaper brands. This is because they are still seen as desirable on the used market. On the 2014 study by Glass, MINI topped the list for cars with the best residual values with a 16.4% loss annually. This was ahead of brands like Audi (19.50%), Mercedes (20.60%), BMW (21.50%), and Jaguar (23.20%)
Since no-one can predict the future, it’s impossible to truly know which cars will suffer the most from depreciation down the line. However, while some models will become collector’s item due to a low production number or a high-profile appearance in a Hollywood movie, we can generally look at past models in the range to determine what kind of results to expect. Use websites like What Car to work out the likely costs.
When it comes time to sell your car in a few years, think about potential buyers will be looking for. Most buyers shopping in the used market will be looking for the best bang for their buck, so they’ll prioritize aspects like fuel economy. The Mercedes CLS-Class, for instance, offer some of the company’s most luxurious cars, but because they’re fitted with large petrol engines that are expensive to run, they don’t hold their value very well.
In many cases, your best bet is to buy older models from used outlets like this. This way, you benefit from the fact the car has already depreciated in value significantly, so by the time you’re ready to sell it on again the difference won’t be nearly as severe.