Used Car - Controlling Used Car Depreciation

Controlling Used Car Depreciation

Car companies have a vested interest in ensuring that cars do not depreciate too heavily for two main reasons:

1. Brand reputation: If a car becomes known for losing a lot of money as a used car, it scares consumers away from buying them new.
2. Fleet sales: Car companies survive because of fleet sales, which give manufacturers crucial guaranteed sales that allow them to plan production volumes and achieve ‘economies of scale’ that make selling cars to consumers more viable. The manufacturers sell cars in large blocks as company cars, or to leasing businesses and these deals are all worked out on the likely value of the cars when they are sold off again (for example in 24 months). Car manufacturers, lease companies and anyone with large stocks (of cars) has a vested interest in ensuring that cars do not lose value too quickly.

They often attempt to manage the depreciation through securing positive media coverage of the cars and managing supply into different sales channels (such as auction, supermarkets and dealers) so that there is no over-supply of any particular model in any geographic area.

This ensures that demand per car stays high and prices do not drop too quickly.