Car depreciation is what makes cars a bad investment—they always lose value over time. If we could sell our cars for what we paid, we’d be collecting them like baseball cards. But the reality is, 99.9% of vehicles lose value, just like rust on an old car.
Cars aren’t investments—they’re tools for transportation. On average, a new car loses 20% of its value in the first year and 40% by year three. Imagine buying a house for $500,000, only for it to drop to $300,000 in value three years later—that’s the same financial hit you take with many new cars. Here’s a closer look at what car buyers should expect with depreciation, and how to avoid the worst of it.
Is Depreciation Inevitable?
When you buy any new car, depreciation can’t be avoided. On average, new cars will lose around 20% of their value after one year of ownership. After that, they may lose about 15% more per year until the four-year mark.
However, not all cars depreciate equally. As an extreme example, we’ve seen low-mileage luxury cars and EVs lose over 50% of their value over just three years. The good news is that it doesn’t have to be this bad.
The worst depreciation happens in the first few years for a new car. By avoiding a brand-new vehicle and buying one that’s 2-5 years old, you can dodge the steepest drop in value. Let someone else take the loss! When you buy a gently used car, you will lose far less money to depreciation if you decide to sell your car in the future.
Smart Shopping Pays Off
When it comes to new car depreciation, the numbers don’t lie. New car depreciation is unavoidable. A new car costing $40,000 can easily lose $16,000 in value over three years, costing the owner over $400 per month in depreciation. But if you buy that same car at three years old for $24,000, you’ll only lose $7,500 in value over the next three years—less than half the depreciation cost.
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Conclusion: Weighing the Trade-offs
Yes, there’s something special about driving a brand-new car. But unless you really love that new-car smell and pulling off those safety stickers, a slightly used vehicle offers the best bang for your buck. Be smart, shop wisely, and use our tools to find the best value on the market. Use the tools available today with CarEdge’s Research Hub – it’s 100% free data!
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