February 21, 2013

Car Depreciation Over Time

You may have heard someone say that "new cars lose half their value when you drive them off the lot" or something similar.   While its true that cars depreciate a hefty amount in their first year its not that steep of a drop that fast.   After the car is used it tends to depreciate at a more gradual pace year over year.

I pulled sales prices off Edmunds for several car models :
Toyota Camry, Ford Crown Victoria , Honda Accord, Chevy Malibu , Cadillac Escalade
Dodge Grand Caravan , Acura RL
 I chose those models semi-randomly.   I needed to pick some cars that had been on the road over many years.   I also wanted some cars from various manufacturers.

First lets look at the actual dollar value for a few typical used sedans based on model year.

(click image for full size)
As you can see there  the pattern of depreciation is pretty similar.  

Now lets normalize and look at % values from the start over a number of year.   The chart below looks at prices starting in either 2011 or 2012 and then shows the % of value retained each year after that.   So for example the cars are generally down to 50% of the original value by the 5-7 year period and then down to only 20% by 8-13 years.

This is a pretty small sample of cars so I'm not going to try and take much meaning out of this as far as differences between models.    The idea here is just to look at depreciation for cars in general.

Note: This is a crude approximation of depreciation trends.  For one I'm ignoring inflation and not figuring the initial retail cost of the older cars when new versus their current resale value. 


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