{"id":74306,"date":"2026-06-28T01:18:07","date_gmt":"2026-06-28T05:18:07","guid":{"rendered":"https:\/\/www.globalvillagespace.com\/tech\/?p=74306"},"modified":"2026-06-28T01:18:30","modified_gmt":"2026-06-28T05:18:30","slug":"depreciations-hidden-impact-why-car-finance-deals-mask-risks-for-buyers-and-manufacturers","status":"publish","type":"post","link":"https:\/\/www.globalvillagespace.com\/tech\/depreciations-hidden-impact-why-car-finance-deals-mask-risks-for-buyers-and-manufacturers\/","title":{"rendered":"Depreciation\u2019s Hidden Impact: Why Car Finance Deals Mask Risks for Buyers and Manufacturers"},"content":{"rendered":"

How Finance Products Have Recast the Role of Depreciation in Car Buying<\/p>\n

The proliferation of Personal Contract Purchase (PCP) finance deals has fundamentally altered the psychological and practical calculus of car ownership. Where depreciation once loomed as the central anxiety for buyers\u2014an ever-present specter threatening to erode hard-earned capital\u2014today\u2019s consumers, seduced by low monthly payments and the promise of guaranteed future values, have largely relegated it to the background. This shift is not merely a matter of perception; it reflects a structural change in risk allocation. Under PCP arrangements, the residual value risk migrates from the individual to the finance company or manufacturer, at least on paper.<\/p>\n

Yet, this apparent risk transfer is not absolute. The evidence suggests that while consumers may feel insulated from depreciation, the underlying economic forces remain unchanged. Cars continue to lose value, often precipitously, as a function of oversupply, shifting consumer preferences, and technological obsolescence. The industry\u2019s current insulation from depreciation\u2019s full force is contingent on manufacturers\u2019 willingness\u2014and ability\u2014to subsidize or hedge against unexpectedly rapid value declines. When these hedges falter, as seen recently with electric vehicles (EVs) and certain overproduced models, the costs re-emerge elsewhere in the system: higher future finance rates, reduced equity at contract end, or even outright losses for finance houses. Thus, depreciation has not disappeared; it has merely been displaced, its consequences deferred and redistributed.<\/p>\n

Why Oversupply and Market Fragmentation Exacerbate Depreciation Risk<\/p>\n

The used car market\u2019s core mechanism remains supply and demand. When manufacturers flood the market with new vehicles\u2014often to satisfy short-term sales targets or to maintain factory utilization rates\u2014they inadvertently set the stage for accelerated depreciation. Three years hence, these vehicles re-enter the market en masse, overwhelming demand and driving down prices. This dynamic is especially pronounced when manufacturers chase fleet and rental sales, which, while boosting short-term numbers, can saturate the used market with nearly identical, low-mileage vehicles.<\/p>\n

The current UK landscape, with an estimated 80 car brands vying for a market growing at a tepid 1.4%, exemplifies this fragmentation. The resulting pressure to \u201cmove metal\u201d has produced discounts approaching 27% on some models\u2014a boon for the new car buyer, but a harbinger of future depreciation pain. When these heavily discounted cars return as used stock, their values are almost certain to be undermined, particularly if technological advances or shifting tastes render them less desirable than newer alternatives.<\/p>\n

The \u201cChina Effect\u201d: How New Entrants Threaten Residual Values<\/p>\n

A less obvious but increasingly consequential force is the entry of aggressively priced Chinese brands. These newcomers, exemplified by models like the Chery Tiggo 4, offer compelling value propositions that recalibrate consumer expectations. The practical significance is twofold: first, they directly undercut the retained values of comparable used vehicles from established brands; second, they force legacy manufacturers to respond with deeper discounts and more generous finance terms, further eroding residual values across the board.<\/p>\n

This dynamic is not merely theoretical. Industry observers warn that brands such as Honda and Suzuki could see their used values disproportionately affected, as buyers gravitate toward newer, cheaper alternatives. The full impact remains contested, as brand loyalty and perceived quality still exert some moderating influence, but the direction of travel is clear: downward pressure on used values, especially for models lacking clear differentiation.<\/p>\n

Why the Current Used Car Price Strength May Be Ephemeral<\/p>\n

Superficially, the used car market appears robust. Scarcity of three- to five-year-old vehicles\u2014an aftershock of the COVID-19 pandemic and subsequent supply chain disruptions\u2014has buoyed prices. Data from market analysts indicate that average values for three-year-old cars have risen by 1.7%, with even decade-old vehicles appreciating modestly. Hybrids, estates, and convertibles have outperformed, reflecting both supply constraints and shifting consumer preferences.<\/p>\n

Yet, this price strength is fragile. The methodological boundaries of these data points are clear: they capture a moment of artificial scarcity, not a new equilibrium. As the backlog of new car production clears and the wave of discounted, PCP-returned vehicles hits the market, the supply-demand balance will likely tip. The lesson for sellers is tactical: maximize returns while scarcity persists, but do not mistake a temporary reprieve for a structural shift.<\/p>\n

Who Bears the Real Risk\u2014and What Should Informed Buyers Do?<\/p>\n

While finance products have shielded consumers from the immediate sting of depreciation, the risk has not vanished; it has simply migrated. Finance houses and manufacturers now shoulder the burden, but their tolerance is finite. When residual values disappoint, the consequences ripple outward: higher finance costs, stricter credit terms, and, ultimately, less generous deals for future buyers.<\/p>\n

For the informed buyer, the implication is clear. Do not conflate low monthly payments with immunity from value loss. Assess the likely future value of any vehicle, especially if considering outright purchase or early contract termination. Pay particular attention to segments vulnerable to oversupply or technological obsolescence\u2014EVs and models facing new, cheaper competition are especially exposed.<\/p>\n

Depreciation\u2019s \u201cWinners\u201d and \u201cLosers\u201d: What the Data Conceal<\/p>\n

Lists of slowest- and fastest-depreciating cars offer a seductive clarity, but their practical significance is more nuanced. The Lamborghini Urus, for instance, appears to defy gravity, with used values exceeding new prices\u2014a phenomenon driven by constrained supply and speculative demand, not replicable for the average car. Similarly, the Suzuki Jimny\u2019s strong retention reflects niche appeal and limited availability, not inherent immunity to depreciation.<\/p>\n

Conversely, the precipitous falls seen in models like the Polestar 2 or Nissan Leaf highlight the vulnerability of early-generation EVs to rapid technological change and shifting incentives. These data points, while methodologically robust for their sample, do not guarantee future performance; they are snapshots, not forecasts. The real lesson is the volatility of residual values in a market buffeted by technological, regulatory, and competitive shocks.<\/p>\n

Second-Order Consequences: Beyond the Dealer Forecourt<\/p>\n

The mainstream narrative often overlooks the broader economic and environmental consequences of accelerated depreciation. Rapid value loss discourages long-term ownership, incentivizing a cycle of frequent replacement that carries both financial and ecological costs. Moreover, as finance houses respond to unexpected losses by tightening terms or raising rates, access to affordable mobility may become more constrained for marginal buyers.<\/p>\n

For policymakers and industry strategists, the challenge is to reconcile the short-term imperatives of sales targets with the long-term health of the used market. Overproduction, excessive discounting, and indiscriminate fleet sales may offer temporary relief, but they sow the seeds of future instability.<\/p>\n

What Judgment Should the Reader Draw?<\/p>\n

Depreciation, though temporarily masked by finance innovation and market anomalies, remains a central\u2014if now more complex\u2014risk in car ownership. The evidence suggests that today\u2019s bargains may be tomorrow\u2019s liabilities, especially as new entrants and technological shifts accelerate the obsolescence of existing models. Informed buyers should approach finance deals with skepticism, interrogate the underlying assumptions about future values, and resist the lure of apparent short-term gains that may conceal longer-term costs. The prudent course is vigilance: understand not just the monthly payment, but the structural forces shaping the market\u2019s next turn.<\/p>\n","protected":false},"excerpt":{"rendered":"

\"used<\/a><\/p>\n

PCP deals have put depreciation out of mind for most motorists, but it could soon bite back<\/p>\n

\n

Whatever happened to depreciation?<\/p>\n

There was a time\u00a0when it was car buyers’ main concern. Now, not so much. Perhaps the popularity of PCP finance<\/a> deals is the reason. With the car’s minimum future value guaranteed, a vague promise of equity at the end of the term to put towards the next one and lower monthly payments than hire purchase, PCPs might just have brushed the spectre of depreciation under the carpet.<\/p>\n

“If you’re buying on a PCP, you’re not looking at the value of the car at the end of the term, you’re looking at how much you’re paying a month,” says Paul Toomer, founder of Car-Pod, a used car dealership near Southampton. “Plus, assuming the dealer pays enough for your old car, you’ve got a cash-free deposit and you’re in a new one.”<\/p>\n

So yes, depreciation may have been brushed under the carpet. However, like everything under there, sooner or later it will come back to the surface. The fact is that cars still depreciate, mainly because there are too many of them chasing too few buyers.<\/p>\n

“Supply and demand is always key in the used car market,” explains Derren Martin, an automotive consultant at vehicle data firm Cazana. “Put a lot of new cars into the market and in three years’ time they will be back as used cars. If their numbers are more than the market can reasonably absorb, they will depreciate fast.”<\/p>\n

\"\"<\/p>\n

Factor in a weak image, an unpopular specification, doubtful provenance, poor condition or a high mileage and watch a car depreciate faster still. But again, with a PCP to rescue them, do car buyers actually care?<\/p>\n

“From a consumer’s point of view, depreciation is probably less important, because on a lease such as a PCP they’re not taking any risk,” says Chris Plumb, new car valuations expert at another automotive data firm, Cap HPI. “However, within the industry, depreciation is still a hot topic. Manufacturers are certainly becoming more attuned to it, because if your cars are performing well in the market and you’re doing everything to maximise their residual value, that translates into their forecast value from people like us and from your finance houses, so you can support your vehicles less.”<\/p>\n

With a PCP, your monthly payments are a combination of the interest charged on the car’s total price plus its depreciation during the finance term. If the car were forecast to be worth nothing at the end of the term, the size of the monthly payments would be through the roof. The finance company or the manufacturer would have to subsidise them by slashing the purchase price, offering a big deposit contribution or by shoring up the car’s value with its own money.<\/p>\n

In fact, some manufacturers and their finance companies are having to deal with this very problem. It’s not that their cars are forecast to be worth nothing, rather that they have depreciated far faster than was predicted, turning what was hoped to be an asset into a liability.<\/p>\n

“It has been a tough time for finance houses in recent years, especially with the big falls in EV values to deal with,” explains Martin. “In response, they’ve become masters of their own destiny, setting their own residual values rather than referring to forecasters such as Cap HPI. One of the big things they’re doing is secondary leasing – sweating the asset a bit more by putting it back on lease rather than putting it into the used market.”<\/p>\n

Manufacturers and finance companies would rather not have to throw their cars a lifeline – which is why they’re careful how they market their new cars to large fleets.<\/p>\n

\"\"<\/p>\n

“The decisions car makers take today influence depreciation tomorrow,” says Plumb. “So, for example, they avoid being over-represented in the daily rental market. It puts bums on seats but, when the cars are moved on after six months, there’s a risk they will swamp the used market, depressing values.”<\/p>\n

It’s estimated that there will be around 80 car brands on the UK market by the end of this year. However, sales of new cars are expected to grow by only around 1.4% to a little over two million. The result is that manufacturers are under more pressure to move metal. There are reports of discounts approaching 27% on some models.<\/p>\n

“For consumers, 2026 will be the year of the deal,” says Robert Forrester, CEO of Vertu Motors, one of the UK’s biggest new car dealership groups. “The offers for consumers will be unbelievable and, in my opinion, even uneconomic for dealers and manufacturers, they will be that good.”<\/p>\n

Plumb says that he recently saw a popular, three-year-old SUV with 26,000 miles on the clock being advertised by a car supermarket on a three-year\/30,000-mile PCP, with a \u00a32500 deposit and an APR of 10%, for \u00a3410 per month. Elsewhere, on a popular leasing website, he found a brand-new example of the same model and over the same term but with an APR of 0% for \u00a3277 per month.<\/p>\n

“People are looking for value for money,” says Plumb. “They’re asking what the monthly payments look like and whether they can come out of their three-year PCP and be offered a new car on similar terms. On the strength of these examples, they can.”<\/p>\n

Bumper discounts, deposit contributions, low-rate finance: on the surface, they’re great news for car buyers financing new cars on a PCP. However, at the end of the term, the return of these cars en masse to the market could have a depressing effect on future used car values.<\/p>\n

“New car offers are so good, especially those being offered by the new Chinese brands, that when all these discounted new cars return as used ones in 18 months’ time, who will buy them and what will they be worth compared with a new one?” asks Martin. “Electric cars especially are likely to have outdated tech that buyers don’t want; values will fall.<\/p>\n

“How used cars are resold to consumers will be critical. If they end up with car supermarkets, they risk being sold more cheaply, undermining their values and fuelling depreciation.” Toomer is wary of cars less than three years old: “In my experience, the heaviest depreciation occurs in the first three years of a car’s life. On its third birthday, a car with average mileage is worth about half what it cost new. It means that any car we stock that is two years old is still depreciating quite quickly and, if it doesn’t sell for a few months, all of a sudden we face selling it at a loss.”<\/p>\n

Looking ahead, declining brand loyalty and mounting pressure from Chinese newcomers threaten to worsen depreciation for some legacy\u00a0brands and certain sectors of the market.<\/p>\n

\"\"<\/p>\n

“The arrival of cheap new cars from China will threaten the values of many existing used ones,” says Martin. “Take the Chery Tiggo 4<\/a>, for example. It’s a genuinely impressive car for just \u00a319,995 new. If you’ve a used car that’s equivalent to it but it costs more, its value is likely to drop.<\/p>\n

“The China effect also threatens to depress the values of used models from some of the legacy brands. Honda<\/a> and Suzuki<\/a> could be at risk.”<\/p>\n

These are dark clouds on a horizon that threatens to become cloudier. Depreciation may appear to be hidden under the carpet at present, but there are signs that it could bite back.<\/p>\n

Current used market trends<\/h2>\n

Despite the pressure they face, used cars are generally worth more today than they were at the turn of the decade. In part this is due to the scarcity of three- to five-year-old cars, caused by the collapse of new car sales during the Covid pandemic and delays to car supplies resulting from parts shortages when the Ukraine war began.<\/p>\n

At the same time, rising new car prices have boosted used car demand. In its latest market analysis, Cazana reports the average values of used cars at three years old have increased by 1.7%, adding around \u00a3340 to retail prices. One-year-old cars are up 0.7% with five-year-olds up 1.4%. Even 10-year-olds, the bedrock of the budget car market, have risen 0.5%.<\/p>\n

At all price points, all fuel types have increased in value, with hybrids leading the charge at 2.3%, while EVs are up 1.4%. The star performers? The promise of warmer weather has inflated used convertible values by 2.6% – and, owing to lower numbers and rising demand, estates and MPVs are up 3.4% and 2% respectively. These bullish numbers are reflected on the forecourts, says Car-Pod’s Paul Toomer: “I’m still having to pay high prices for stock. I can’t get anywhere near what [other] dealers are bidding for cars on the online buying platforms and then paying a \u00a3400 charge on top for the service.”<\/p>\n

However, although its effects are partially masked by finance products such as PCPs, depreciation is still happening, and Chris Plumb at Cap HPI suspects its previous seasonal highs and lows are returning. “It’s all to do with supply and demand, and there’s a lot of supply,” he says. The lesson is that if you have a quality used car to sell or part-exchange to offer, ignore the doomsayers and hold out for the highest offer you can get while it’s still on the table.<\/p>\n

Top 10 Slowest-Depreciating Cars At 3 Years and 30,000 Miles\u00a0<\/span><\/h2>\n
\n\n\n\n\n\n\n\n\n\n\n\n\n
\u00a0<\/th>\nCar Model<\/th>\nAvg. New<\/th>\nAvg. Used<\/th>\nRetained<\/th>\n<\/tr>\n
1<\/td>\nLamborghini Urus<\/td>\n\u00a3159,925\u00a0 \u00a0 \u00a0 \u00a0<\/td>\n\u00a3178,655\u00a0 \u00a0 \u00a0<\/td>\n111.7%<\/td>\n<\/tr>\n
2<\/td>\nSuzuki Jimny<\/td>\n\u00a315,941<\/td>\n\u00a317,080<\/td>\n107.1%<\/td>\n<\/tr>\n
3<\/td>\nMercedes-Benz G-Class<\/td>\n\u00a3142,244<\/td>\n\u00a3128,858<\/td>\n90.6%<\/td>\n<\/tr>\n
4<\/td>\nVolkswagen California TDI<\/td>\n\u00a354,236<\/td>\n\u00a348,579<\/td>\n89.6%<\/td>\n<\/tr>\n
5<\/td>\nPorsche 718 Cayman<\/td>\n\u00a353,113<\/td>\n\u00a347,359<\/td>\n89.2%<\/td>\n<\/tr>\n
6<\/td>\nBentley Bentayga PHEV\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/td>\n\u00a3130,500<\/td>\n\u00a3114,635<\/td>\n87.8%<\/td>\n<\/tr>\n
7<\/td>\nJeep Wrangler<\/td>\n\u00a344,527<\/td>\n\u00a338,322<\/td>\n86.1%<\/td>\n<\/tr>\n
8<\/td>\nPorsche 718 Boxster<\/td>\n\u00a350,407<\/td>\n\u00a342,988<\/td>\n85.3%<\/td>\n<\/tr>\n
9<\/td>\nDacia Duster<\/td>\n\u00a314,004<\/td>\n\u00a311,828<\/td>\n84.5%<\/td>\n<\/tr>\n
10<\/td>\nAudi RS3 Saloon<\/td>\n\u00a347,775<\/td>\n\u00a339,991<\/td>\n83.7%<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Top 10 Fastest-Depreciating Cars At 3 Years and 30,000 Miles<\/span><\/h2>\n
\n\n\n\n\n\n\n\n\n\n\n\n\n
\u00a0<\/th>\nCar Model<\/th>\nAvg. New<\/th>\nAvg. Used\u00a0<\/th>\nRetained<\/th>\n<\/tr>\n
1<\/td>\nPolestar 2<\/td>\n\u00a349,990\u00a0 \u00a0 \u00a0\u00a0<\/td>\n\u00a320,991\u00a0 \u00a0 \u00a0 \u00a0<\/td>\n42.0%<\/td>\n<\/tr>\n
2<\/td>\nBMW i3<\/td>\n\u00a335,896<\/td>\n\u00a314,552<\/td>\n40.5%<\/td>\n<\/tr>\n
3<\/td>\nAudi A8 Hybrid<\/td>\n\u00a376,716<\/td>\n\u00a330,486<\/td>\n39.7%<\/td>\n<\/tr>\n
4<\/td>\nMG ZS EV<\/td>\n\u00a327,275<\/td>\n\u00a310,348<\/td>\n38.0%<\/td>\n<\/tr>\n
5<\/td>\nMercedes-Benz EQC<\/td>\n\u00a371,407<\/td>\n\u00a326,653<\/td>\n37.3%<\/td>\n<\/tr>\n
6<\/td>\nVauxhall Grandland X PHEV\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/td>\n\u00a339,679<\/td>\n\u00a314,426<\/td>\n36.4%<\/td>\n<\/tr>\n
7<\/td>\nHyundai Kona Electric<\/td>\n\u00a336,295<\/td>\n\u00a313,088\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/td>\n36.1%<\/td>\n<\/tr>\n
8<\/td>\nVauxhall Corsa-e<\/td>\n\u00a329,167<\/td>\n\u00a39,858<\/td>\n33.8%<\/td>\n<\/tr>\n
9<\/td>\nNissan Leaf<\/td>\n\u00a331,643<\/td>\n\u00a39,965<\/td>\n31.5%<\/td>\n<\/tr>\n
10<\/td>\nJaguar I-Pace<\/td>\n\u00a372,776<\/td>\n\u00a320,175<\/td>\n27.7%<\/td>\n<\/tr>\n<\/table>\n<\/div>\n<\/div>\n","protected":false},"author":1,"featured_media":74307,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"footnotes":""},"categories":[2,137],"tags":[],"class_list":["post-74306","post","type-post","status-publish","format-standard","has-post-thumbnail","category-featured","category-news"],"_links":{"self":[{"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/posts\/74306","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/comments?post=74306"}],"version-history":[{"count":1,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/posts\/74306\/revisions"}],"predecessor-version":[{"id":74308,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/posts\/74306\/revisions\/74308"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/media\/74307"}],"wp:attachment":[{"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/media?parent=74306"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/categories?post=74306"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.globalvillagespace.com\/tech\/wp-json\/wp\/v2\/tags?post=74306"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}