When you buy a car and pay R250 000 for it the book value will be R250 000 at the time of purchase. A year later your car’s book value in your books may still be R250 000 but that is not the real value anymore. Depreciation needs to be deducted every year from the purchase price to obtain the real book value of an asset such as a car. In the early years after having bought a new car the depreciation rate is at its highest.

The rate of depreciation on used cars has increased considerably during the past few years when new car prices started to stabilize and even come down. That was not good news for the second hand car market. Anyone would rather buy a new car if you can afford it and the car dealers were offering lower prices on trade-ins.

To establish the current book value of your car you need to contact a reputable car dealer. Request your insurance company to reduce the insurance value accordingly and your insurance payment will come down.

Many people think that they can improve the value of their cars by spending money on car accessories such as expensive sound systems but this does not increase the book value of your car. Car navigation systems is the one exception as they are extremely popular and people are prepared to pay a premium for a car with a navigation system.