Do All Cars Depreciate Over Time? (Explained)

Owning a car and driving it is one of the most expensive things in life. But the boring part of it is when you think of the value after a while, definitely the value is not the same as when you bought it-it has depreciated!

Car depreciation refers to the decrease in value over time. It is the difference between the worth of the car when you bought it and the worth at the moment if you were to sell it.

In this article, we will be examining if all cars depreciate over time.

Here’s the short answer to whether all cars depreciate over time:

Cars lose value fast because people prefer to drive new cars and because older cars are more expensive to maintain. The quality of a car’s make, the reputation of the brand, and specific vehicle owner behaviors can affect the depreciation of cars.

Do All Cars Depreciate Over Time?

Unlike buildings and apartments that get higher values over time, all cars depreciate over time.

Once you buy a new car, the value decreases immediately you drive off the lot.

There are several reasons why your car’s value decreases. Here are some of the major ones:

  1. Age: Old cars tend to be cheaper than new cars. Their values would have decreased over the years.
  2. Mileage: If you can keep the mileage of your car down, it will be worth more and keep its value. However, if the mileage is high, the car would have a lower value.
  3. Condition: A car with moderate wear and tear would have a higher value than one that is extremely damaged in the interior and the exterior.
  4. Fuel economy: Car buyers always want to get more miles per gallon. A car with a better fuel economy gets more valued.
  5. Reputation: A car that’s built to last will retain its value more than a model that is popularly known for breaking down or is perpetually in the news for recalls. Also, cars that are not fuel efficient depreciate faster compared to those that are more fuel efficient. This is because car owners are not interested in cars that are expensive to run.

Car depreciation is unfortunately inevitable. There are, however, some few steps that can slow down the depreciation process:

  • reducing your car’s mileage
  • keeping the car tidy
  • following up on proper routine maintenance
  • getting vehicles with good reputation
  • buying a reliable, gently used car

How Much Do Cars Depreciate on Average?

Cars depreciate differently based on model, mileage, maintenance, etc.

But on average terms, your car loses about 10% of its worth after about one minute of driving home from the dealer. 

This implies that if you bought your car for $30,000, you have trashed $3,000 of its worth through the window in that one minute.

After a year, your car suffers the biggest decline in value. The car would have lost 20% of its worth at this time.

The depreciation then slows gradually after the first year, and at the end of five years, the value of the car would be between 40 to 60%.

Related: 5 Popular Cars That Depreciate the Least (With Pictures)

What Type of Cars Depreciate the Least?

According to iseecars.com, the type of vehicles that depreciate least are majorly trucks, SUVs and sport cars.

On iseecars.com, Jeep Wrangler comes first in the top ten vehicles with the lowest depreciation in 5 years. It depreciated by 9.2% in 5 years, compared to the average 40.1%.

Jeep Wrangler Unlimited, the same brand with the first, came second on the table. It depreciated by 10.5% in 5 years.

Porsche 911 came third with a depreciation value of 12.8%.

The Toyota brand appeared three times on the list.

Toyota Tacoma, Toyota Tundra and Toyota 4Runner came forth, fifth and tenth respectively. They also depreciated by 13.8%, 19.5%, and 24.6% respectively in 5 years.

Ford Mustang came sixth on the list and depreciated by 21.0%.

The seventh and eighth vehicles are from the Chevrolet brand.

Chevrolet Corvette with 22.7% and Chevrolet Camaro with 23.6% are the seventh and eighth respectively on the list.

Dodge Challenger came ninth on the table with a depreciation rate of 24.4%.

What New Cars Today Depreciate the Least?

New cars that have the least depreciation are the ones with durability, fuel economy and are known to be reliable.

Majority of them are SUVs, trucks and sports cars. The Toyota Corolla, Toyota Camry, Toyota RAV4, Jeep Wrangler, Honda Accord, Ford Explorer and many other such cars are extremely popular among car buyers.

Tesla’s electric vehicles also keep their value really well, and some are now worth more used than when they were new.

That said, generally, electric cars lose value faster than gas-driven cars.

Ford F-150, Chevrolet Silverado, Toyota Tacoma and the Ford Ranger are other new cars that have relatively low depreciation rates. This is thanks to their exceptional quality and reliability, which contributes to their low depreciation. 

Related: How Quickly Do Electric Vehicles Pay For Themselves? (Explained)

How Old Should a Car Be to Have the Least Depreciation?

Depreciation reduces as cars get older. A fairly used car of about 1 to 2 years would definitely depreciate slower than a brand-new car.

To reduce depreciation when buying a car, it is recommended that the car should be between 3 to 7 years. Cars younger than that will likely depreciate faster, and cars older than 7 years would have developed so many wears and tears they won’t suffer any more depreciation.

On average, the best age to buy a used car is 5 years.

It is important to also take note of the model, mileage, maintenance history, etc.

Definitely, you might still not be able to determine the reliability or strength of the car. You may want to get a car expert to help check the health of the car thoroughly before buying it.

Related: Mercedes & Depreciation: Numbers + Examples You Should Know

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