how much do cars depreciate per year

That new car smell is one of the most expensive scents in the world. The moment you drive a brand-new vehicle off the dealership lot, its value begins to drop. This financial reality, known as depreciation, is the single largest cost of car ownership for most people. If you’ve ever wondered about the financial journey of your vehicle, you’re likely asking a common question: how much do cars depreciate per year?

The Steepest Drop: The First Few Years

Depreciation isn’t a gentle slope; it’s more like a cliff in the beginning. On average, a new car loses about 20% of its value the moment you drive it away. By the end of the first year, that number can climb to over 30%. After five years, the average vehicle is often worth less than 40% of its original purchase price. This means a $40,000 car could be worth only $16,000 after half a decade.

How much do cars depreciate per year on different models?

While averages are helpful, your car’s specific rate of depreciation depends heavily on its make and model. Some vehicles are famous for holding their value, while others plummet quickly. Generally, trucks and popular SUVs from brands like Toyota and Honda tend to depreciate the slowest. They are known for reliability, which keeps demand high on the used market. Luxury sedans and electric vehicles with rapidly changing technology often experience the fastest depreciation.

Simple Ways to Slow the Value Drop

While you can’t stop depreciation, you can certainly slow it down. Keeping your car in good condition with regular maintenance and a full service history makes it much more attractive to future buyers. Avoiding major modifications and keeping the mileage as low as your lifestyle permits also helps preserve value. A clean interior and exterior, free of dents and stains, shows that the car has been cared for, justifying a higher resale price.

Using Depreciation to Your Advantage

Understanding this financial process can actually save you money. If you prefer lower monthly payments and dislike the steep initial value loss, consider buying a car that’s two or three years old. Let the first owner absorb the heaviest depreciation hit. You get a nearly-new vehicle for a significantly lower price, and it will likely depreciate at a much slower rate from that point forward.

Thinking about depreciation isn’t the most exciting part of car ownership, but it’s one of the smartest. By choosing a model known for holding its value and maintaining it well, you protect your investment and set yourself up for a better financial return when it’s time to sell.