Cars that hold their value

If you are thinking about buying a new car, don't do so without considering the results of a recent study by Which? magazine. Which? found that new cars lose between half and three-quarters of their value during the first three years that you own them. The rate of depreciation depends on a range of factors, including the manufacturer's reputation, mileage, condition, reliability and running costs. But the number one factor is desirability. Stylish cars such as the Mini hold their value well, while the Nissan Primera - which Which? recommends for its safety, reliability and security - is bottom of the depreciation table. Why? Because nobody fantasises about owning a Nissan.

It is true that cars depreciate differently, but treat these statistics with caution, says Miles Brignall in The Guardian. Which? uses full list prices, and while that might make sense on a BMW, where discounting is thin on the ground, you can pick up a Primera from a broker for £11,400 - much less than the list price of £15,250. This "rather makes a mockery" of the Which? figures for depreciation. Also, more expensive cars often require more expensive parts and that makes them less good value over time.

Nonetheless, two vital lessons emerge. First, there are big differences in depreciation rates, which savvy buyers need to know about. "It can be worth paying up front for a more desirable car that holds its value well," says Which? editor, Malcolm Coles. For example, if you fancy a luxury car, you may as well spend £28,340 on a Mercedes-Benz E class rather than £24,400 on an Alfa Romeo 166 2.0 since the Alfa will lose 77% of its value and the Mercedes only 54%, making the Alfa just £450 cheaper overall after three years. Second, depreciation is most severe in the first three years, after which cars lose their value much more slowly. Three-year-old cars can therefore be fantastic bargains. If you like owning brand new cars - and who doesn't - go for damage limitation, says Car Buyer magazine. The VW Beetle 1.6l convertible, list price £15,830, is the car "your bank manager would most like you to own" as it retains an "incredible" 76% of its value after three years.

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That means depreciation costs you just £1,246 a year. The magazine's other top four choices were the BMW Z4 2.2SE (£24,500), which retains 74% of its value; the Porsche Boxster 2.7 (£31,450), which keeps 72%; the enormously alluring Lotus Elise 1.8 (£22.995), keeping 71%; and the "superb" Audi A3 1.9TDI (£16,730), which holds 69%. Make sure you get the best deal you can when you buy - the less you pay, the less your car will depreciate. The car supermarkets, such as AutoPlanet, generally offer the best deal and What Car publishes lists of the prices you should be able to get away with.