How much does a car depreciate when you drive it off the lot? You hear everybody talk about that and you assume that it must be so to some degree. But does anybody really know on average just how much? Well, yes, Edmunds’ research pegs the average car depreciation the minute you drive it off the lot reduces the True Market Value (TMV) to 91%. Wow! That is a very expensive one minute ride.
Why is that? How can a vehicle depreciate so much, so quickly? It has to do with perception. Once the vehicle has been driven off the lot, others no longer perceive it as a new vehicle and it instantly loses 9% of its true market value on average. We are human beings and not everything we do is rational, and this is one of them. Feelings are feelings. But some feelings are more expensive than others.
Average Car Depreciation After One Year
So you would think that the immediate 9% average depreciation rate of cars right off the lot should just about do it for that first year, right? Wrong! The average True Market Value continues to plummet in the first year to 81% at the end of it. Of course, mileage is a factor and the less there are the better. And different makes and models can have decidedly varying results. We are addressing the average vehicle in this report.
Average Vehicle Depreciation After Two Years
By the end of the second year, average car depreciation actually speeds up and rests at 69% of the original sales price. So year two sees an additional 12% lost value. Another way to look at it, the average vehicle in year two loses 1% of its value every month. A buyer might be paying a $400 per month car loan for the right to lose another $400 per month of value. Which is why most automobile experts counsel buyers to think of vehicles more as an expense rather than an asset.
Average Automobile Depreciation After Three Years
The three year mark is probably most germane to our discussion. That’s because most vehicle leases expire after 36 months, or three years. Those cars, pickup trucks, suv’s, minivans, etc., are most likely to come on the used car market for resale at the 3 year period. The news for sellers is not good. The average car depreciation at the end of three years returns a True Market Value of 58%.
That’s just the average. What models perform the worst after three years? The answer might surprise you. According to AutoTrader and iseecars, cars that depreciate the most are the BMW 5 Series at 52.6%, followed closely by the Volkswagen Passat at 50.7%. Two more German models, the Mercedes-Benz E-Class (49.9%) and BMW 3 Series (49.8%) are also big losers. Two American models, the Ford Taurus (49.7%) and Chrysler 200 (48.4%), also depreciate fast by losing half their value in only three years.
Let’s keep it coming because we are really just splitting hairs among the top ten car depreciation losers. Two more German models among highest depreciating cars, the Volkswagen Jetta (48.1%) and Audi A3 (47.9%), are hardly any better. And then in 9th and 10th place are American models Cadillac SRX (47.2%) and Buick Enclave (46.8%) to finish off our list of cars to think twice about.
Notice there are no Japanese models among the fastest depreciating vehicles. The Japanese well earned reputation for reliability holds up to scrutiny, and they retain their value far better than German and American vehicles. The German cars in particular, can be very expensive when it comes to maintenance and repair.
Average Car Depreciation After Four Years
At the end of fours years, the average vehicle depreciation rates fell to a True Market Value of 49%. That means after fours years the average vehicle has lost half of its value. Good to know, right? If you think about it, the aforementioned German and American vehicles accomplished the same trick in a very fast three years.
Average Auto Depreciation After Five Years
Five years down the road both literally and figuratively, the average depreciation cars fell to a True Market Value of 40%. Do you notice a pattern? Every year the average vehicle depreciates roughly 10%. That trend doesn’t stop, folks. By the tenth year, the average car is almost worthless.
Of course, you can always sell the average vehicle for something after ten years. But truth be told, it isn’t much and it’s always buyer beware.
Cars That Depreciate The Least
The cars with lowest depreciation rates might really surprise you. We’re actually very proud to say that according to iseecars.com, the best two vehicles that depreciate the least in 2018 are the Jeep Wrangler Unlimited and Jeep Wrangler, tied at only 27% after five years! The Jeep Wrangler rocks! The only other vehicle that approaches the Jeep Wrangler is the Toyota Tacoma at an impressive 29.5%.
Rounding out the list of best ten vehicles with lowest depreciation are in order:
Toyota Tundra 37.1%
Chevrolet Silverado 1500 39.7%
GMC Sierra 1500 39.9%
Subaru Impreza 42.3%
Ram Ram Pickup Truck 1500 42.7%
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