Purchasing a new car is exciting; however, it is critical to understand that the moment the owner gets out of the dealer’s premises with the car, its value drops. Depreciation can be described as the consistent reduction of a person’s asset throughout a period of time. Therefore, a thorough understanding of the depreciation rates is very important especially for car buyers who are targeting famous models found within Pakistan such as the Toyota Yaris, Suzuki Alto, Suzuki Cultus, Honda Civic, Suzuki Swift and Toyota Corolla. In this blog, we’ll examine how depreciation affects these models, the causes of depreciation and some ways that can be used to reduce depreciation when buying a new car in Pakistan.
What is Depreciation?
Usually depreciation is when the value of a car reduces with time due to some reasons like spoiling the vehicle, distance covered in mileage, number of years which have passed and availability of demand. When you purchase such a vehicle, it is ready to start functioning with depreciation rate set immediately to begin falling and the biggest value decrement occurs within the first 3 years. Globally as well as within Pakistan, depreciation continues to be an important aspect cutting across pricing when it comes to resale of automobiles.
Key Contributors to the Rate of Decrease in Value of Automobiles
It is valid to state that there are numerous factors that enhance the rate at which a car depreciates. These include:
- Brand Recognition
- First Purchase
- Mileage and Condition
- Supply versus Demand
- Fuel Economy
- Technological Used
Evidently these factors are further reviewed for some of the best selling cars in Pakistan which include Toyota Yaris, Suzuki Alto, Suzuki Cultus, Honda Civic, Suzuki Swift and Toyota Corolla.
Car Model Depreciation in Pakistan
Toyota Yaris
Pakistan introduced the Toyota Yaris in the vehicle class of compact sedan but it has drawn users owing to its economical petrol consumption, latest stylish features and reliability of brand Toyota. The Yaris is usually amongst the top models in terms of residual value after the market sale; it is so regardless of the bad condition of the car.
- Initial depreciation: Overall, a new Toyota Yaris is generally expected to lose value at an approximate rate of 15-20% during the first year. This is comparatively low towards some other models especially due to the fact that the brand Toyota was well perceived across all in Pakistan.
- Long-term depreciation: Yaris returns about 45% directly after five years if purchased. The car has such slow depreciation because of the fact about durability of Toyota cars and the brand popularity on the used car market.
Suzuki Alto
One of the cheapest cars that offer great mileage in Pakistan is the Suzuki Alto. It is very common for budget price oriented customers’ hence the car resale value comes in long after it’s supposed to in a car of that category.
- Initial Depreciation: An owner’s first year depreciation on the Alto car is usually in the range of 12-18% this however varies from one country to another and is low for a budget type of car like the Alto. Its low purchase price and higher fuel consumption power make it perform well in the second hands and this helps lessen the reduction in new features sales.
- Long-term Depreciation: For the Alto it will lose about thirty to forty percent of its initial price value after five years. The harsh truth about this automobile depreciation is that it occurs every year but despite this fact, the vehicle is stable in usage, especially for those who buy it to resell it after a few years.
Suzuki Cultus
The Suzuki Cultus has been a popular hatchback selling vehicle in Pakistan for several decades now. The new generation CULTUS which is full of modern features and fuel efficiency veers in as a leading preference in this category of mid-range markets.
- Initial Depreciation: The Cultus is generally the expected worst hit in its first year where 15-20% loss of value takes place. The Cultus despite its strong demand in both urban and rural areas helped sustain the first depreciation low out.
- Long-term Depreciation: Five years later, the Cultus is likely to have a depreciation of 45-50% or lower. While the long-range depreciation stood at a higher rate than others, the reliability and relatively low cost in terms of maintenance pose it as a solid return on investment for most buyers.
Honda Civic
In Pakistan, the Honda Civic is among the best-selling premium class sedans because of its beautiful design, modern specifications and great driveability. But since this is a premium vehicle, naturally, the rate of depreciation is a little bit higher than those affordable vehicles.
- Initial Depreciation: As per depreciation norms, the Honda Civic may lose almost 20-25 percent of its value in the first year alone. This is a common problem facing many valuable and luxurious automobiles, wherein the first many years of service is usually associated with much loss due to depreciation.
- Long-term Depreciation: After five years, the Honda Civic is projected to have about 50 -55% valuation loss. Despite this reason elderly customers still purchase Honda cars as they are loyal to the brand which has enabled Honda to remain competitive in the used car segment.
Suzuki Swift
This is an appealing hatchback designed type of vehicle to the younger markets’ concerns as the Suzuki Swift. It has reasonable capabilities and features for the price point at which it’s marketed; however its depreciation rate is slightly higher than other Suzuki models such as the Alto and cultus.
- Initial Depreciation: In the first year, the depreciation of the Swift stands at about 18-22%. This is largely because there is less demand for it than for other hatchbacks such as Cultus and Alto.
- Long-term Depreciation:It is forecasted that, after five years, the Swift will have only about 45 to 50% of its initial value. It has been seen that this model depreciates at a somewhat higher rate than other Suzuki models. Nevertheless, it is a good option for those who are after a coupe with a little elegance.
Toyota Corolla
Appearing in all lists, the Toyota Corolla is one of the most selling vehicles in Pakistan with trust, strength, and resale value. Among all sedans, the Corolla tends to depreciate less than others.
- Initial Depreciation: The first year is when the Corolla incurs only a slight 12-18% depreciation from its book value- more than 18% in the cabin segment is indiscriminately considered quite low. This is due to people being loyal to the brand of Toyota and the Corolla being one of the most popular car models in Pakistan.
- Long-term Depreciation:After 5 years of use, a Corolla would have depreciated about 40 to 45 % of its values. This makes it one of the best buys for people who are in the business of buying and selling automobiles and tilted towards retaining their values over the years.
How to Reduce the Degree of Car Depreciation
It is apparent that depreciation on cars is an unavoidable aspect. However, its effects can be reduced in a number of ways
- Choose Popular Brands
There is a lesser depreciation of cars when using brands with a good image such as Honda and Toyota. Typical examples of such high-value vehicles are Toyota Corolla or Honda Civic.
- Go Green
Fuel economy is one of the major determinants of vehicle pricing trends in Pakistan. It is therefore no longer a wonder to find models such as the Suzuki Alto and the Toyota Yaris being very fuel-efficient, and even in more demand therefore less prone to depreciation.
- Regular Maintenance
Practicing these will increase the chances of lower depreciation on the car such as regular servicing. There is high demand for such cars in the used car market in Pakistan and at better prices.
- Avoid Customizations
Customizing a car from its original design and features does affect the resale potential of that car in an adverse manner. Try to leave the car as is in order to preserve more of its value.
- Limit Mileage
It is less likely that if a car has covered a low distance, it will suffer much depreciation. To assist with this, where there is absolutely no purpose in going out, use the car less.
Conclusion
Lastly, it is imperative to note that knowing the depreciation rates of the new cars in Pakistan is significant when considering buying a new car. For instance, the depreciation rates of popular models in the market such as the Toyota Yaris, Suzuki Alto, Suzuki Cultus, Honda Civic, Suzuki Swift, Toyota Corolla, and many others vary, based on the brand, fuel efficiency, and other prospects. There are ways however on how to reduce the depreciation value of the car and raise the chances of better future resale value after an appropriate selection of the car and its maintenance.
