Unlike real estate, cars, trucks and SUVs inevitably depreciate (except for rare circumstances), frequently at a rapid rate immediately after purchase. In fact, depreciation is an important factor to consider when purchasing a vehicle. Depreciation refers to the decrease in value of a car over time due to wear and tear, age, demand and other factors.

Depreciation can be a major expense for car owners, as it can significantly reduce the resale value of a vehicle. Accurately predicting how much your car will depreciate over time, as well as which vehicle brands and makes best hold value, can help you make an informed decision when buying a car.

How Much Value Do Cars Lose?

The amount of value a car loses depends on the make, model and year of the vehicle. In general, a new car will lose around 20 to 30 percent of its value in the first year. For instance, if you purchase a brand-new car for $30,000, a year later that same car may only be worth $21,000.

Over the first five years, a new car will lose approximately 40 percent of its original price. This can be a significant loss if you’re thinking about selling or trading-in your car for another vehicle.

This rapid and steep drop in value on relatively new vehicles is one of the major factors that entices many buyers to shop for preowned vehicles. A car that’s a couple years old and has low mileage can be a steal for frugal buyers looking to avoid paying full price on a brand-new car, truck or SUV.

Which Cars Have the Lowest Depreciation Rates?

Cars frequently have some of the steepest depreciation rates of all vehicle types, but depreciation is not uniform across the board. Small and midsize cars typically have the lowest depreciation rates due to their affordability and fuel efficiency. Popular models that tend to be in high demand frequently retain their value better than less popular vehicles.

There’s a number of small and midsize cars with great five-year residual value:

• Toyota Corolla
• Honda Civic
• Honda Accord
• Toyota Camry

On average, these models tend to retain 60 percent of their original value within the first five years.

Although those four models are popular for a good reason – they’re great, reliable vehicles – used car shoppers shouldn’t ignore models with steeper depreciation. High vehicle depreciates means you’ll enjoy an even bigger discount when you buy a car that’s only three or four years old. You could get a great pre-owned vehicle with low mileage at a steep discount if shop for lower-demand vehicles with high depreciation rates.  

Which Trucks Have the Lowest Depreciation Rates?

Pickup trucks are known to hold their value better than just about every other vehicle category. The pickup trucks with the lowest depreciation rate are typically those that are popular among professionals and commuter drivers, well-maintained, have low mileage and are in good condition.

Some of the most popular models with the lowest depreciation rates include the Toyota Tacoma, Honda Ridgeline, Chevrolet Colorado, Ford F-150 and Nissan Frontier. On average, these trucks retain approximately 70 percent of their original value within their first five years.

Which SUVs Have the Lowest Depreciation Rates?

If you’re looking for a family-friendly vehicle, a pre-owned SUV may be a great option. There are several makes and models to choose from, but if you’re looking for an SUV with a low depreciation rate, consider these models:

• Toyota Highlander
• Honda CR-V
• Ford Escape
• Subaru Forester

These SUVs retain around 68 percent of their original value within their first five years. Not only do these vehicles have a good resale value, but they’re also known for excellent safety ratings and reliability.

What You Can Do to Slow Down Your Vehicle’s Depreciation

Although vehicle depreciation is an unavoidable occurrence, there are several things you can do to slow it down and keep your vehicle from unnecessarily losing value (which is especially important if you’re planning to eventually sell it):

• Regularly maintain your vehicle
• Keep your car clean and free of dents and scratches
• Avoid modifications that could reduce your vehicle’s value
• Drive the car responsibly and avoid aggressive driving habits
• Park in a garage or covered area to protect it from the elements
• Consider purchasing an extended warranty to cover any unexpected repairs or maintenance costs that may arise in the future
• Consider investing in a vehicle tracking system to monitor its location and usage, which can help prevent theft or misuse of the vehicle by others

Shop for Quality Pre-Owned Cars, Trucks and SUVs in Washington D.C. or Baltimore

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With competitive prices and knowledgeable staff, you're sure to find the perfect vehicle for your unique needs.