How much value does a car lose per year?

Annual depreciation varies significantly by vehicle type and age. New cars typically lose 15-25% in the first year, then 10-15% annually for the next few years. After 5-7 years, depreciation slows to 5-10% annually. Pickup trucks and SUVs lose value slower than sedans, while luxury vehicles depreciate faster. Over a 5-year period, most vehicles retain 30-50% of their original value, meaning they lose 50-70% total.

Do used cars depreciate slower than new cars?

Yes, used cars depreciate slower than new cars in percentage terms. A new car might lose 20-30% in its first year, while a 3-year-old car might lose only 10-15% annually. However, used cars still lose absolute dollar value—they just start from a lower base. The advantage of buying used is avoiding the steepest initial depreciation, not eliminating depreciation entirely.

Do EVs depreciate faster?

Electric vehicles often depreciate faster than comparable gas vehicles, especially in early years. Rapid battery technology improvements and charging infrastructure changes make older EVs feel outdated quickly. Battery degradation concerns also reduce resale value. However, some EV models hold value better than others, and depreciation rates are stabilizing as the market matures. Higher-mileage EVs face steeper depreciation due to battery health concerns.

Does mileage matter more than age?

Mileage generally matters more than age for depreciation, though both factors matter. A 5-year-old car with 30,000 miles typically retains more value than a 3-year-old car with 80,000 miles. High mileage indicates more wear and reduces remaining vehicle life, directly impacting resale value. However, very old vehicles (10+ years) face depreciation regardless of mileage due to technology and safety feature obsolescence.

Is depreciation higher in the first year?

Yes, depreciation is highest in the first year for new vehicles, typically 20-30% of purchase price. This rapid initial loss happens because the vehicle immediately becomes "used," loses warranty value, and faces competition from newer models. After the first year, depreciation typically slows to 10-15% annually for the next few years, then further slows to 5-10% after 5-7 years. This pattern makes buying a 1-2 year old used vehicle attractive for avoiding the steepest depreciation.

Car Depreciation Calculator (US) – 3, 5, and 7 Year Value Estimates

Typical Depreciation by Car Type

Car Type	3-Year Value Retained	5-Year Value Retained	7-Year Value Retained	Notes
Compact sedan	55-65%	40-50%	30-40%	Steady depreciation pattern. Good resale value for reliable models.
Mid-size sedan	50-60%	35-45%	25-35%	Similar to compact sedans with slightly higher initial depreciation.
SUV	60-70%	45-55%	35-45%	Strong demand helps retain value better than sedans.
Pickup truck	65-75%	50-60%	40-50%	Best value retention. High demand and durability support resale prices.
Luxury vehicle	45-55%	30-40%	20-30%	Faster initial depreciation. Higher maintenance costs reduce resale appeal.
Electric vehicle	50-60%	35-45%	25-35%	Rapid technology changes cause faster early depreciation. Battery concerns affect later years.

Note: These ranges are estimates based on national resale trends. Actual depreciation varies by specific vehicle condition, market demand, and location. Mileage and maintenance history significantly impact resale value.

Why Some Cars Lose Value Faster

Market Demand

Vehicles with strong buyer demand hold value better. Pickup trucks and SUVs typically depreciate slower than sedans because more buyers want them on the used market. Luxury vehicles face steeper depreciation because fewer buyers can afford them used, reducing demand.

Repair and Maintenance Costs

Vehicles with expensive repair costs lose value faster as they age. Buyers avoid used cars that require costly maintenance, reducing resale prices. Luxury vehicles and some electric vehicles face this challenge due to specialized parts and service requirements.

Fuel Economy Changes

As fuel prices fluctuate and efficiency standards improve, older vehicles with poor fuel economy lose appeal. Gas-guzzling vehicles depreciate faster when fuel costs rise, while fuel-efficient models maintain better resale value.

Technology Aging

Rapid technology changes make older vehicles feel outdated quickly. Electric vehicles face this most acutely as battery technology and charging infrastructure improve. Vehicles without modern safety features or infotainment systems lose value faster as buyers prefer newer technology.

Warranty Expiration

Vehicles lose value when factory warranties expire, typically after 3-5 years. Buyers pay less for used cars without warranty coverage because they assume repair risk. Extended warranties can help maintain value, but expiration still impacts depreciation rates.

Depreciation vs Total Ownership Cost

Depreciation is often the largest single cost of car ownership, frequently exceeding insurance, fuel, and maintenance combined. A $30,000 vehicle that loses $12,000 in value over three years costs $4,000 annually in depreciation alone—more than most owners spend on fuel or insurance.

Why Depreciation Matters

Unlike fuel or insurance, depreciation is a hidden cost you don't pay monthly. You feel it when you sell or trade in your vehicle. Understanding depreciation helps you choose vehicle types that hold value better and plan for total ownership expenses over time.

Comparing Ownership Costs

Over five years, depreciation typically accounts for 40-50% of total ownership costs for new vehicles. Insurance, fuel, and maintenance combined often cost less than depreciation alone. Used vehicles reduce depreciation but may increase maintenance costs, creating a trade-off.

To see how depreciation fits into your total ownership costs, use our comprehensive calculator that includes insurance, fuel, maintenance, and depreciation.

Use Total Cost Calculator → See Insurance Costs Learn About Maintenance

New vs Used Cars and Depreciation

New cars lose value fastest in their first few years, typically depreciating 20-30% in the first year alone. This rapid initial depreciation means buying new costs significantly more in lost value than buying a 2-3 year old used vehicle.

Why New Cars Depreciate Fastest

New vehicles face immediate depreciation the moment they're driven off the lot. The first owner absorbs the steepest value loss, typically 20-30% in year one. This happens because the vehicle immediately becomes "used" and loses warranty value, while newer models enter the market.

Why Used Cars Reduce Depreciation Risk

Used vehicles have already experienced their steepest depreciation. A 3-year-old car that lost 40% of its value continues depreciating at a slower rate—typically 10-15% annually. Buying used means someone else absorbed the rapid initial value loss.

When Depreciation Matters Less Than Reliability

For vehicles you plan to keep 7+ years, depreciation becomes less important than reliability and maintenance costs. The total value loss matters less when spread over many years, and repair costs become the primary concern. In these cases, choosing a reliable vehicle type may matter more than minimizing depreciation.

Compare new vs used car ownership →

How We Estimate Car Depreciation

Our depreciation estimates use rule-based logic analyzing national resale trends, mileage impact bands, vehicle type demand patterns, and ownership duration smoothing. We don't use predictive models or machine learning—just straightforward analysis of real-world resale data.

National Resale Trends

We reference national resale value data from industry sources showing how different vehicle types retain value over time. These trends reflect actual market behavior across the United States, accounting for regional variations and market conditions.

Mileage Impact Bands

We categorize mileage into impact bands: low (under 10,000 miles annually), moderate (10,000-15,000 miles), and high (over 15,000 miles). Higher mileage increases depreciation because vehicles with more wear command lower resale prices. Each band adjusts the base depreciation rate.

Vehicle Type Demand Patterns

Different vehicle types have different demand patterns affecting depreciation. Pickup trucks and SUVs hold value better due to strong demand, while luxury vehicles and some electric vehicles depreciate faster due to market factors and technology changes.

Ownership Duration Smoothing

Longer ownership periods smooth annual depreciation rates. Vehicles depreciate fastest in early years, then slow down. Our estimates account for this pattern, showing that while total depreciation increases with time, the annual rate typically decreases after the first few years.

For detailed information about our calculation methodology across all cost factors, see our comprehensive guide.

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