This Car Body Style Has Best Resale Value!
Indian car buyers are some of the most savvy buyers, and even before making the decision to buy a car, they first check if the vehicle will have a good resale value in the future or not. Now, if you are someone who is planning to buy a car in the near future and you don't know which type and segment of vehicle retains most of its value, then you have come to the right place. Here are the details of each car type and how they hold their values in the long term.
Depreciation and how it works?
We know you are getting impatient to know the answer to the main question. However, we first have to explain depreciation. It is the silent cost that is paid by the owner of the vehicle for the duration they keep it. In terms of the definition, depreciation is the reduction in the value of an asset over time, due in particular to wear and tear.
Now, generally, it is a 20–30% loss of value of a vehicle in the first year. Then, in years 2–5, it is around a 10–20% annual loss. A five-year-old vehicle generally retains 50–60% of its original value. The pace of depreciation varies significantly between hatchbacks, SUVs, sedans, and MPVs, depending on segment popularity, demand, and perceived utility.
Hatchbacks depreciate the least
Not all, but most hatchbacks retain around 75–76% of their original value in year one. Then, by year 5, they retain around 60% value, which gives them the slowest depreciation rate.
Why do hatchbacks retain value best?
Now, you may be wondering why hatchbacks retain most of their value. Well, the answer to this is that they have affordable pricing when they are new. Their lower initial cost makes them accessible, leading to stronger resale demand. Another reason is that their compact size and practicality make them attractive for first-time buyers and city drivers.
Most Indians want lower maintenance costs for their vehicles, and hatchbacks are easy and economical to maintain, so their long-term desirability is very high. They are also very fuel-efficient, which helps them retain demand over time.
SUVs
Coming to the most popular segment in India and across the globe, most mid-size and some more popular SUVs retain around 75% of their value. And by year 5, they retain around 55–60%, which is slightly lower than hatchbacks but much better than other segments.
Why do SUVs hold value well?
The biggest reason is the popularity of SUVs amongst Indian buyers. Most new car and old car buyers now prefer SUVs for style, ground clearance, and road presence. They are capable of handling highways, rough roads, and family use, which makes them very popular.
As mentioned, compact and mid-size SUVs are especially popular in the second-hand market. Premium features and aspirational appeal keep used prices higher.
MPVs
Bigger family car buyers are now increasing in the country. As a result, they are retaining a decent amount of their original cost. However, it is still lower compared to hatchbacks and SUVs. The Toyota Innova and the Maruti Suzuki Ertiga are some of the most popular MPVs in the market, and they have been able to break the usual pattern of MPV depreciation due to their demand and reliability.
Sedan: Worst resale value
Sedans, which once used to be very popular in India, have now become the most heavily depreciated class of cars. Year 1 of sedan depreciation starts the same as hatchbacks and SUVs. However, by the fifth year, the values drop to 50–55%, which is the lowest of all car segments.
This is mainly due to the shift in the buying preference of new car buyers. People now only want to buy SUVs and crossovers due to their practicality and road presence. Also, many sedans are used in fleet operations, which has now reduced their desirability among normal car buyers.