Buying a new car is often spun as exciting and luxurious — but it’s also a very serious financial move. For most Americans, purchasing a vehicle is the biggest buy of their lives, second only to buying a new home. To that point, the average price of a new vehicle just hit a whopping $39,000 as of December 2019.
There’s one thing that often gets overlooked in the car-buying process: depreciation. Alas, pretty much every vehicle on the market is susceptible to losing a good deal of its value almost immediately after you drive it off the lot.
“Vehicle depreciation is unfortunately unavoidable,” said Richard Reina, product training director at CARiD. “The moment a brand new car’s registration, licensing and insurance process is completed, it is legally designated as a used vehicle. When this occurs, the price drops, regardless of how many miles the owner has driven it. Supply and demand for new vehicles also impacts depreciation rates. For instance, if a particular make or model is popular and production goes on for a number of years, it will depreciate more slowly. This is due to the fact that shoppers are more willing to pay a higher price for a desirable car, especially a new one. On the flip side, if a model doesn’t sell well, its value will drop sharply to reflect the fact that shoppers aren’t likely to pay a premium for what they consider an undesirable vehicle.”
While it’s impossible to say with exact certainty how fast your car will depreciate, one can make a pretty reliable prediction based on the original retail value. Here’s a look at how cars in all price ranges depreciate over time — and why it’s so important to find a reliable vehicle.
Last updated: July 24, 2020
