Cars Depreciate Faster Than You Think
Average Car Depreciation Rates After One Year
How much do cars depreciate when you drive them off the lot? You hear everybody talk about that, and you assume it must be so to some degree. But does anybody know, on average, just how much? Well, yes, Edmunds’ research pegs that the average car depreciation the minute you drive it off the lot reduces the True Market Value (TMV) to 91%. Wow! That is an expensive one-minute ride.
Why is that? How can a vehicle depreciate so much so quickly? It has to do with perception. Once the car is driven off the lot, others no longer perceive it as a new vehicle, and it instantly loses 9% of its actual 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.
So 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 fewer 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, cars depreciate even faster. It 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. That 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 most germane to our discussion. That’s because most vehicle leases expire after 36 months or three years. Those cars, pickup trucks, SUVs, minivans, etc., will most likely come on the used car market for resale in the three years. 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, the 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 splitting hairs among the top ten car depreciation losers. Two more German models among the 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 well-earned Japanese reputation for reliability holds up to scrutiny, and they retain their value far better than German and American vehicles. German cars, in particular, can be costly for maintenance and repair.
Average Car Depreciation After Four Years
At the end of four years, the average vehicle depreciation rates fell to a True Market Value of 49%. That means the average vehicle has lost half of its value after four years. Good to know, right? If you think about it, those mentioned German and American cars accomplished the same trick in a swift three years.
Average Auto Depreciation After Five Years
Five years down the road, both literally and figuratively, the average depreciation of 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 the lowest depreciation rates might surprise you. We’re very proud to say that according to iseecars.com, the two best vehicles that depreciated 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 the best ten vehicles with the lowest depreciation in order:
Toyota Tundra 37.1%
Nissan Frontier 37.8%
Toyota 4Runner 38.1%
Chevrolet Silverado 1500 39.7%
GMC Sierra 1500 39.9%
Subaru Impreza 42.3%
Ram Ram Pickup Truck 1500 42.7%
How To Slow Down Your Car Depreciation Rate
As you can see, cars depreciate quickly starting the minute you drive them off the lot. You can’t stop this from happening, but you can slow it down. How? By taking great care of your car and being proactive about avoiding unnecessary use and abuse.
For starters, stay on top of scheduled service and maintenance. Your manual will outline what kind of service (oil changes, brake pad replacements, etc.) your make/model needs and on what schedule. You can also get this info online or through a dealership. As much as possible, get a qualified mechanic to perform this work on schedule even if your car doesn’t seem to need it. Your car depreciation rate goes a lot less quickly when old parts and dirty fluid gets swapped out for something new.
You should also monitor your car for signs that it’s not looking or performing as well as it used to. Notice if the gas mileage starts to decline, the engine makes strange sounds or any of the features start to malfunction. The sooner you address the issues, the better – you will usually save money on the parts/repairs and cause less depreciation to your car.
Be vigilant about the interior and exterior too. Wash the outside and vacuum the inside to keep the car from showing its age. A little care and attention applied regularly can keep your vehicle looking and driving like new (and retaining more of its value) after years of being on the road.
Still, the odometer doesn’t lie.
The more miles a vehicle drives, the more it depreciates, even if the owner keeps it in excellent condition. So how do you keep miles off the odometer without keeping your vehicle in the garage where it may not depreciate, but it’s not doing you much good either? You ship your car instead of driving it.
Whenever you need to get a car from point A to point B, whether a few hundred miles or from one coast to the other, consider shipping it instead of driving it. It rides safely on the back of a vehicle trailer instead of being subjected to harsh roadway conditions that accelerate car depreciation rates, not to mention the fact that you get to avoid hours and hours of driving and all the costs, hassles, and dangers that come with it.
The Original Car Shipping Quote Calculator
Direct Express Auto Transport originated the instant car shipping quote calculator in 2004. It is still the best, most sophisticated, reliable tool available anywhere online. We offer three options that we call tiers of car shipping estimates. The standard rate is the cheapest car shipping quote, but it may take longer. Use it if you are patient. We recommend the expedited car shipping rate and have countless satisfied customers because the shipping process tends to go quicker. The rush rate is our highest level of car shipping service, and many customers are glad they went with that method.