How Car Depreciation Works
A new car loses approximately 20% of its value in the first year and about 15% each subsequent year. After 5 years, a typical car retains about 37-40% of its original value. Depreciation is the single largest cost of vehicle ownership.
Depreciation Formula
Average Depreciation by Year
| Year | Value Remaining | On $35,000 Car |
|---|---|---|
| New (Year 0) | 100% | $35,000 |
| Year 1 | 80% | $28,000 |
| Year 2 | 68% | $23,800 |
| Year 3 | 58% | $20,230 |
| Year 5 | 42% | $14,617 |
| Year 10 | 18% | $6,097 |
Frequently Asked Questions
Which cars depreciate the least?
Toyota, Lexus, and Porsche typically have the lowest depreciation. Trucks and SUVs like the Toyota Tacoma and Jeep Wrangler also retain value well. Luxury vehicles generally depreciate the fastest.
How can I minimize depreciation loss?
Buy used (1-3 years old), choose models with strong resale value, maintain the vehicle well, keep mileage reasonable, and sell privately rather than trading in at a dealer.
Does mileage affect depreciation?
Yes. The average car is driven 12,000-15,000 miles per year. Higher-than-average mileage increases depreciation. A car with 100,000+ miles will be worth significantly less than one with 60,000 miles at the same age.