Key takeaways
- A typical new car loses ~9% when titled, ~20% in year one, and 55–60% by year five. On a $40,000 car that’s roughly $23,000 gone before the loan is paid off.
- Depreciation is the largest single cost of owning a new car — bigger than fuel, insurance or maintenance.
- Trucks, Toyota, Honda, Subaru and sports cars like the Porsche 911 hold value best; luxury sedans and most EVs lose it fastest (often 60–70% in five years).
- The cheapest years to own a car are years 4 through 8, after the curve flattens — which is why a 3-year-old used car is such good value.
Depreciation is the cost nobody puts in the budget because nobody writes a check for it. It shows up once, at the end, as the difference between what you paid and what you get back — and for most new-car buyers that number is bigger than everything they spent on gas, insurance and repairs put together. Understanding the curve is the single most useful thing you can know about car ownership costs, because it tells you when to buy, what to buy and how long to keep it.
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The depreciation curve, year by year
| Age | Typical value remaining (mainstream car) | Lost that year | Example: $40,000 car |
|---|---|---|---|
| Drive off the lot | ~91% | ~9% | $36,400 |
| 1 year | ~78–80% | ~20% | $31,500 |
| 2 years | ~67–70% | ~12–15% | $27,500 |
| 3 years | ~58–60% | ~12% | $23,500 |
| 4 years | ~51–53% | ~10% | $20,800 |
| 5 years | ~42–46% | ~10% | $17,800 |
| 7 years | ~33–36% | ~8%/yr | $14,000 |
| 10 years | ~22–26% | ~6–7%/yr | $9,500 |
Two features of the curve matter most. The cliff: about 40% of the car’s value disappears in the first three years. The plateau: from year five onward the car loses only a few percent a year in dollar terms that keep shrinking. Buy on the plateau and depreciation becomes a minor cost; buy at the top and it’s the dominant one. Project your own car with the depreciation calculator.
How depreciation compares to other costs
For a $40,000 new SUV driven 12,000 miles a year and kept five years, a typical breakdown looks like this: depreciation about $22,000; fuel about $9,500; insurance about $11,000; maintenance and tires about $4,500; loan interest about $4,500; registration and fees about $2,000. Depreciation is roughly 40% of the total — and it’s the one cost that buying a 3-year-old car instead cuts by more than half. See the full picture in our true cost of owning a car guide.
Which cars hold value best — and worst
Retention studies from iSeeCars, Kelley Blue Book and Edmunds are consistent year after year. The spread between the best and worst segments at five years is enormous: roughly 35% lost versus 65% lost on cars with the same sticker price.
| Segment / brand | Typical 5-year depreciation | Why |
|---|---|---|
| Porsche 911, Toyota Tacoma, Jeep Wrangler, Chevrolet Corvette | 30–40% | Cult demand, limited supply, long-lived |
| Full-size and midsize trucks (F-150, Silverado, Tundra, Frontier) | 35–45% | Work demand, durability |
| Toyota, Honda, Subaru mainstream cars and SUVs | 40–50% | Reliability reputation, strong used demand |
| Mainstream sedans and crossovers (Ford, GM, Hyundai, Kia, Nissan, Mazda) | 50–58% | High supply, fleet sales, incentives on new models |
| Luxury SUVs (Lexus best; BMW, Mercedes, Audi, Land Rover worst) | 50–65% | High repair costs out of warranty, rapid model turnover |
| Luxury sedans (Mercedes S-Class, BMW 7 Series, Maserati, Jaguar) | 60–70% | Smallest used-buyer pool, highest ownership costs |
| EVs (most models) | 55–70% | Fast tech turnover, price cuts on new models, battery-age worries; some stabilizing in 2025–26 |
What makes a specific car depreciate faster
- High mileage — every 10,000 miles above average knocks roughly 3–5% off value.
- Accident history — a reported collision typically costs 10–25% of value even after a proper repair.
- Unpopular colors and odd option packages — white, black, gray and silver hold value; bright colors and stripped or over-optioned trims lose more.
- A redesign or price cut on the new model — the moment a new generation launches, the old one drops; EV price cuts in 2023–2024 crushed used EV values overnight.
- Missing service history — buyers discount what they can’t verify.
- Regional mismatch — a convertible in Minnesota or a 4WD truck in Florida sells for less than it would elsewhere.
How to lose less to depreciation
- Buy at 2–4 years old. You skip the cliff. A 3-year-old car at 58% of its original price loses about $5,000–$7,000 over the next three years instead of $16,000.
- Keep it 8–10 years. Depreciation per year falls every year you own the car; by year eight it’s a few hundred dollars. The people who spend least on cars buy sensible ones and keep them a decade.
- If buying new, buy a high-retention model in a neutral color with the popular trim — and negotiate hard, because every dollar off the price is a dollar you don’t depreciate.
- Keep records and keep it clean. A documented service history and a tidy interior add real money at sale.
- Sell privately rather than trading in; dealers typically pay 10–20% below private-party value.
- Avoid being underwater. Depreciation only hurts when you have to sell. 20% down and a loan of 60 months or less means you’re never forced to — see the gap calculator.
Depreciation and leasing
A lease payment is essentially a depreciation payment: you pay for the value the car loses during your term, plus a finance charge. That’s why leases on high-retention cars (Toyota, Lexus, Porsche) are cheap and leases on fast-depreciating ones are expensive — unless the manufacturer sets an inflated residual to subsidize the deal. It’s also why repeated leasing costs so much: you keep paying for the cliff. The full comparison is in Lease vs Buy: Which Actually Costs Less?
Project its value by vehicle type and mileage, and see the loss per month.
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The Used Car Buying Playbook
Shopping for a used car? Most buyers overpay in four predictable places. This playbook closes every one of them. Budget worksheet, 15-minute VIN screen, test-drive routine, word-for-word negotiation scripts and a 10-point contract check.
Get the Playbook →Frequently asked questions
How much does a car depreciate per year?
About 20% in the first year, 12–15% a year in years two and three, and 8–10% a year after that. By year five a typical car has lost 55–60% of its purchase price.
How much does a car depreciate per mile?
Roughly $0.15–$0.30 per mile for a mainstream car in its first five years (a $40,000 car losing $22,000 over 60,000 miles is about $0.37; a 5-year-old car losing $4,000 over 12,000 miles is about $0.33 but falling). Valuation guides deduct roughly 3–5% of value per 10,000 miles above average.
Do electric cars depreciate faster?
Most have, losing 55–70% in five years versus 45–55% for comparable gas cars, driven by new-model price cuts, fast technology turnover and battery concerns. Some models stabilized in 2025–2026 as new EV prices stopped falling; used EVs are correspondingly good value for buyers.
What is the best age to buy a used car to minimize depreciation?
Two to four years old. The first owner has absorbed the steepest losses, the car is usually still under or near factory warranty, and modern cars at 30,000–50,000 miles have most of their life ahead of them.