What is car depreciation?
Car depreciation is the rate at which your vehicle loses its value over time. After five years, vehicles can lose roughly half their value, although some models retain their value better than others. While you can't avoid depreciation, you can estimate what your vehicle will be worth in a few years if you choose to sell it.
How does car depreciation work?
Cars lose their value over time. Certain factors will influence how much they depreciate. Make and model, age, condition, mileage, ownership history, and even the vehicle's color may affect your car's value. A new car will typically depreciate much faster than a used car. But staying on top of your car's maintenance needs can preserve its value for longer. Use our car depreciation calculator to get an idea of how much your car may be worth over six years.
How fast do cars depreciate per year?
There's no pre-determined rate at which a vehicle will depreciate. Within the first year, many cars will lose up to 20% of their value. After that, they may lose about 15% more per year until the four-or five-year mark.
What factors affect car depreciation?
Keep these factors in mind when estimating your vehicle's value:
- Make and model: If you own a popular make and model of a car, it will likely retain its value longer than one with fewer fans.
- Condition: A vehicle with normal wear and tear will retain its value better than one that's been involved in accidents or used for work. For example, a truck that routinely goes off-road will suffer more damage than a car used for pleasure or commute to and from the office.
- Age: The older your vehicle is, the lower its value — with certain exceptions, such as classic car values.
- Mileage: Vehicles have a practical upper limit on the number of miles they can accumulate without major, expensive repairs. The more miles on a vehicle, the lower its value is likely to be.
Other factors, such as ownership history and even the vehicle's color, can sometimes play a part in depreciation. A custom paint job will likely depreciate a car more than a solid black or grey paint job, for instance.
How can I limit my car's depreciation?
Although you can't prevent car depreciation, there are steps you can take to limit how much value your vehicle loses:
- Limit how much you drive: Putting less than 10,000 miles per year on your vehicle not only keeps the odometer reading low, but it also reduces the risk of accidents and damage.
- Keep your car in a garage or covered spot: Reducing exposure to the elements will preserve the paint job and limit damage from severe weather like hail.
- Perform regular maintenance on your vehicle: Abide by the manufacturer's suggestions on when to receive oil changes, tire rotations, and more. Avoid neglecting the engine, and the vehicle will be worth far more, especially if it's a sought-after model and buyers want all original parts.
If you purchase a used vehicle, it won't depreciate as fast as a new one will. However, its overall value may be lower.