Static Caravans for Life: Understanding Depreciation
It’s one of the fundamental laws of nature that, as a caravan gets older, it depreciates in value. As soon as you open the door of your shiny new static caravan you can start knocking pounds and pence off its original value.
Unfortunately, trying to prevent this depreciation is as futile as holding back the tide. It will happen no matter what you do, you can bet on that. But by understanding how the value of your caravan decreases over time, you can do your best to manage that depreciation and get the best out of your static caravan purchase.
How quickly will my caravan’s value depreciate?
The average depreciation rate of a static caravan is similar to that of a car. This works out at about 15% per year, although this figure is so hugely over simplified that it is barely worth mentioning. In reality, the depreciation of a static caravan – when plotted on a graph – represents a concave curve, or, to put it more dramatically, an aeroplane gradually pulling out of a nose dive and easing into a smooth landing.
This is because newer caravans depreciate more quickly – much more quickly, in fact – than their older counterparts. For each year you hang on before selling your caravan, the less damaging that year will be to its value.
In fact, the National Association of Caravan Owners advise forgetting all about concepts such as “investment” or “resale value”. Buying a caravan that truly suits your needs, in a location that you love, should be the main concern when choosing a unit.
The other option is to go for a second hand caravan. This enables you to bypass those costly first few years of depreciation and acquire a unit with a value that will decrease much more slowly than a brand new one.
The downside to this plan of action is that the lifespan of the caravan will be reduced, meaning that you may be forced to buy another unit sooner. It truly is a balancing act.
Is there anything I can do to manage this depreciation?
The short answer is... not really, no. Caravan depreciation will continue to occur whatever you do. The best policy is to keep your caravan in good condition and well maintained, as no one wants to buy a knackered caravan.
However, there is another thing to consider: the running fees of your caravan.
Site fees, utility bills, insurance and finance payments all contribute to the annual running costs of your holiday caravan. While these costs are an inconvenient but necessary expense, they can be reduced by using your holiday caravan shrewdly.
Revenue acquired from subletting and the real value of free holiday accommodation for you and your family can help towards these annual costs. If you sublet your caravan for 52 weeks of the year, you may even find yourself exceeding this yearly expenditure, although this rather defeats the object of buying a holiday caravan.
What if I need to sell?
The National Association of Caravan Owners recognise that circumstances change. They understand that – even though you may have purchased your caravan with a view to keeping it for 10 years – you may suddenly find yourself in a position where you need to sell up.
In situations like these, damage limitation is the name of the game. Selling your caravan back to the park you purchased it from is likely to secure you only a small fraction of what you originally paid, as the park are likely to offer you only a trade cost price for the caravan (remember your purchase price is based on caravan cost and its sited value). If you are considering a ‘’trade in’’ to upgrade your caravan you may be offered a much better price!
A better option is often to advertise your caravan to private buyers. This way you can try to minimise your losses by getting a better price for the unit. You’ll still be making a loss, but this loss is likely to be significantly lower than if you had sold the caravan back to the park owner.
The best bet, of course, is to spend some time researching your location. Invest a bit of time in selecting a beautiful location that you can get years of enjoyment from and you’ll soon find that that depreciation rate won’t matter one bit.