The worst investment: do you know how much it really costs you to own a car?

Most people know that a new car is a poor investment. The moment it leaves the showroom, it loses a significant part of its value, and within the first few years it can depreciate by half. Many drivers only think about this when the time comes to sell their vehicle. However, the market now offers solutions that allow people to use a car every day without taking on the cost of its depreciation.

Recently, when choosing a car, more and more attention has been paid to the total cost of ownership (TCO), which includes not only fuel, insurance and maintenance expenses, but also vehicle depreciation. Depreciation can account for a significant share of the total cost of owning a car, yet it is far less noticeable in everyday life.

“The true cost of vehicle depreciation would be much clearer to owners if we calculated it as a monthly expense. For example, a car that cost €30,000 may lose €12,000–€15,000 in value over five years. This means that depreciation alone would amount to around €200–€250 per month. Once maintenance, fuel, insurance and other expenses are added, the total cost of owning a car can be considerably higher than the monthly payment to a leasing company. That is why, when assessing the cost of a car, it is important to calculate not only how much we pay each month, but how much the car actually costs us over the entire period of use,” notes Jonas Vainius Raulynaitis, Head of Sales at car subscription company MyBee.

According to him, drivers have recently been taking an increasingly practical approach to cars and looking for ways to reduce the costs associated with their use, which is why car subscriptions are attracting more attention. At first glance, the monthly fee for this service may be similar to a loan or leasing payment, but a subscription includes insurance, servicing, tyres and roadside assistance and, most importantly, eliminates depreciation risk and the hassle associated with selling the car, while protecting against unexpected repair costs. When all vehicle ownership costs are taken into account, this can make financial sense for many drivers.

Which cars depreciate the most?

Data from European vehicle residual value monitoring companies Autovista and Eurotax show that the first owner bears the greatest burden of vehicle depreciation. A vehicle loses value fastest during its first years of use, while after the fourth or fifth year the process slows down considerably. According to these companies, most cars lose around 40–55% of their original value during the first three years.

“A car’s depreciation is determined by more than just its age. Even cars manufactured and purchased on the same day can have very different values three years later. One of the most important factors is mileage – generally, the more kilometres a car has covered, the lower its value. Demand for the make and model, the vehicle’s technical and visual condition, and its accident and maintenance history are also important. In addition, the launch of a new model generation often immediately reduces the price of the previous generation. Broader market trends also have an impact, including fuel prices, taxes and technological changes,” says J. Vainius Raulynaitis.

It is commonly believed that in Lithuania the cars that retain their value best are those that are consistently sought after on the secondary market. However, a vehicle’s residual value and how easily it can be sold depend on many nuances. Popular models, for example, usually have a wider pool of potential buyers, but there are also more of them on the market, which means competing with many similar cars. Rarer models may retain a higher value for longer due to limited supply, but it may take longer to find a buyer.

He also notes that the type of fuel is important. Diesel cars in Lithuania maintained their value relatively well for a long time, but changing demand and increasingly stringent environmental requirements are gradually altering this trend.

The value of electric cars can also decline faster in some cases, especially during the first years of ownership. This is influenced by rapidly improving battery technology, growing supply and frequent model updates – after only a few years, an older-generation electric car may look considerably less attractive than newer models.

Premium-class cars can be particularly sensitive in this respect – even if the percentage depreciation is similar to that of a cheaper car, the absolute amount of money lost will be considerably higher.

“It is impossible to avoid vehicle depreciation completely, but it can be reduced by buying a car on the secondary market, as the first owner has already absorbed the largest drop in value. Of course, there are many factors that need to be considered – from the car’s age, mileage and technical condition to the supply and demand for the specific model on the market,” says the Head of Sales at MyBee.

Buying, leasing or subscribing – who takes on the depreciation risk?

All cars depreciate, but users do not always have to bear this financial burden themselves.

“The likelihood that you will use a car for several years and then sell it for more than you paid is minimal. When buying a car through leasing, the depreciation risk also always falls on the owner. After all, the car loses value regardless of how much is still owed to the leasing company. It may even happen that, when you decide to sell the car, its market value is lower than the amount you still owe the leasing company, meaning you will have to cover the difference,” points out J. Vainius Raulynaitis.

With a car subscription, meanwhile, you pay for the right to use the vehicle, while responsibility for its residual value lies with the service provider. This is one of the key advantages of a subscription. At the end of the subscription period, the car can simply be returned to the service provider and replaced with another model – newer, more comfortable or simply one you like better.

Advice: do not become a servant to your car

With the start of September, traffic volumes on the country’s roads increase sharply. On the streets of Vilnius, for example, traffic intensity can rise by as much as 20–30% compared with the summer period. For many families, a car becomes a vital part of everyday life at this time – children need to be taken to schools, kindergartens and extracurricular activities, adults need to get to work, and countless other errands have to be handled. At the same time, the car is used more intensively, so maintenance, unexpected breakdowns or traffic accidents can create additional concerns.

“A car subscription can make this daily routine much simpler. With MyBee, the monthly fee includes vehicle insurance, scheduled maintenance, replacement of wear parts and tyres, and 24/7 roadside assistance. If the car needs to remain in repair for a longer period, a replacement vehicle is also provided. This leaves the driver with far fewer concerns about car maintenance and unexpected situations. You should not serve your car – your car should serve you,” says J. Vainius Raulynaitis.