What Is Car Depreciation Rate And How To Maintain Your Car's Value

Take a look at the rate at which depreciation is applied to cars and how you can ensure that your vehicle’s value doesn’t drop significantly.

Car Depreciation Rate

Source : Bajaj Finserv

Over time, every asset loses its value gradually due to natural wear and tear. This loss in value that an asset experience is what is termed depreciation. The concept applies to almost every asset, including cars. Whether you’re planning on selling your car or holding it for a few more years, it is important to be aware of the car depreciation rates at all times. 

In this article, we’re going to take a look at the rate at which depreciation is applied to cars and how you can ensure that your vehicle’s value doesn’t drop significantly.

What is the Car Depreciation Rate?

To put it simply, the car depreciation rate is the percentage at which a car loses value over time. In a bid to ensure uniformity, the Insurance Development and Regulatory Authority of India (IRDAI) has set the rate of depreciation for all cars based on their age. Check out the table below for more information. 

Age of the Car	Applicable Car Depreciation Rate
Less than 6 months	5%
6 months to less than 1 year	15% of the value of the vehicle
1 year to less than 2 years	20% of the value of the vehicle
2 years to less than 3 years	30% of the value of the vehicle
3 years to less than 4 years	40% of the value of the vehicle
4 years to less than 5 years	50% of the value of the vehicle

Let’s now take a look at a small example to give you a better understanding of how depreciation actually works. 

Assume that you own a Maruti Suzuki Swift, which was bought for ₹8.5 Lakhs. Currently, the car is 4 years old. According to the car depreciation rate table listed above, your car should have lost about 50% of its value. Using this information, let’s calculate the present value of your car. 

Present value = Purchase price of the car - (Purchase price of the car * depreciation rate)

Present value = ₹8.5 Lakhs - (₹8.5 Lakhs * 50%) = ₹4,25,000  

As you can see, your Maruti Suzuki Swift has lost about ₹4,25,000 in value over the past four years, bringing its present value down to just half of its purchase price. 

Now that you’ve gotten a good grasp of the concept of car depreciation rates, let’s now take a look at the measures that you can adopt to maintain its value over the years.

How to Maintain Your Car’s Value?  

Although depreciation is unavoidable irrespective of how well you maintain your car, there are certain measures that you can take to ensure that your vehicle retains its value. Here’s a quick look at what they are. 

• Use your car judiciously 

One of the many ways through which you can retain your vehicle’s value is by not putting too many kilometres on it. Overusing your car can lead to a higher mileage, which is one of the many factors that can cause it to lose value. So, the next time you’re tempted to take your car out to get to a nearby grocery store, consider walking or cycling instead. This simple exercise will not only ensure that your car doesn’t depreciate quickly but can also help you save money and become healthier. 

• Opt for zero depreciation car insurance 

Another great way to ensure that your car holds its value is by opting for a zero depreciation cover when you purchase or renew your car insurance. Zero depreciation cover is an insurance add-on that’s designed to disregard depreciation at the time of making a claim. 

This effectively means that you will receive the entire value of the claim without any depreciation cuts. Zero depreciation car insurance can help you save a lot of money by reducing or outrightly eliminating your out-of-pocket costs at the time of an insurance claim. However, keep in mind that this add-on cover is only available for vehicles that are less than 5 years old. 

• Store your car safely 

Parking your car under the sun can cause the paint and the interiors to fade, whereas storing your car out during the winter can lead to engine damage. That’s why it is important to always store your car in a closed garage or space. Doing so ensures that it stays safe and can prevent damage due to environmental factors, which can accelerate the loss of the car’s value. 

• Drive your car carefully 

Accidents, mishaps, or even minor damages can cause your vehicle to lose value significantly. Therefore, always make it a point to drive your car in a cautious and careful manner. This can reduce the chances of your car getting damaged due to an accident. A car that has a clean record with no damages tends to hold its value for far longer than vehicles that have an accident history.

Conclusion

Hope you’re now aware of what car depreciation rates are and the steps that you can take to ensure that your vehicle retains its value. Now, if you’re planning on getting a new car, remember to opt for zero depreciation car insurance. It is a highly underrated and often overlooked add-on cover that can come in very handy when you need to make an insurance claim. That’s not all. The add-on is also very affordable and only leads to a nominal premium increase too.

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