Buying a Car

Car Depreciation: How Much Have You Lost?

Greg Lewerer | May 14, 2018
picture of an odometer.

A car is by far one of the best investments you can make… if you’re looking to lose money at a significant rate. Why? It all has to do with a devious little thing called “car depreciation,” which is a fickle mistress that can leave your car feeling insecure and worthless. 

On rare occasions, it can be gentle and slightly generous, but it will almost always beat the living pennies out of anything with four wheels and an engine. Worst of all, it won’t even give you a head start—the second you drive off the lot, it attacks the value of a vehicle like some kind of bad-mannered beast.

Don’t freak out, breathe, and with a hope, a prayer and a big ol’ bowl of our finest fresh-baked wisdom, you might be able to stop the money-hungry monster from feeding off your vehicle’s worth.

Car depreciation chart. How much have you lost infographic.

Is It True that New Cars Depreciate Faster than Older Cars?

Yes, this is true. The second you drive a new car off the lot it will depreciate by as much as 11% of its value, and can lose up to 30% in the first year. Stupid, right?

Just How Accurate Are Car Depreciation Calculators?

For the most part, they’re just rough guesstimates. There are too many undefined factors like the perceived condition, gas prices, and trends that can screw up the numbers for everyone, so most use averages to get you in the ballpark. 

Out of all the calculators we tried, our favorite was the Edmunds TCO® calculator

What Causes Some Cars to Depreciate Faster than Others?

There are a number of reasons, but the two biggest are reliability and popularity; it’s all that “supply and demand,” Econ 101 stuff. If no one wants it and it runs like garbage, its value will plummet. However, there are several constants that will cause a car to continually trend down. 

  • Gas Guzzlers: Vehicles that get lower MPG tend to fall out of contention due to the extra cost and guilt.
  • Luxury: Cars that were built for showing off tend to lose most of their shine within the first few years.
  • Longevity: Who in their right mind would want to pay sticker price for a vehicle that’s not known for its reliability.

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Car depreciation chart. How much have you lost infographic.

Reference: From our friends at J.D. Power (2015)

Why Should You Care about Car Depreciation Rates?

If you’re going to keep your car for 7+ years, you can back-burner your worries. If you’re planning to upgrade every couple of years with financing, you should probably do your depreciation homework or you’ll be eating a steady diet of green. (Money. Not salad.)

Are There Ways to Limit the Total Depreciation?

It’s impossible to stop the depreciation train from crushing your vehicle, but there are steps you can take to slow it down.

  • Buy used (3-5 years old): Let the previous owner eat the deprecation.
  • Keep. Hanging. On: Once a car hits 10 years, deprecation is no longer a factor.
  • Maintain the value: Keep your service records up-to-date, and repair any damage quickly.
  • Buy smart: Choose a popular color and options that will add value.
  • Low mileage: Keep your miles down as much as you can to help increase resale value.

Conclusion

There it is, a bunch of thrilling info to get you all kinds of excited about buying a brand-new car. On the other hand, some of the info may have swayed you into buying a used vehicle. Either way, we hope we thoroughly educated you on the ins and outs of car depreciation. 

Good luck, and may your decisions be smart and financially responsible.

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