When you drive a new car off the dealer’s lot that car just lost up to 20% of its value. What gets left behind, at a minimum, is the dealer’s profit margin along with the value of any overpriced options. After that, annual depreciation can slice off 15% or more of the car’s value. And that’s every year, from the depreciated value of the car in the prior year.
According to researchers at auto data and research firm iSeeCars.com, the situation is not that bad. The average depreciation on a new car after three years is 35%. That’s still pretty high if you’re the car’s owner, but if you’re in the market for a lightly used vehicle, there are some vehicles that depreciate even faster and you might be surprised at what you can get for your money.
U.S. new vehicle sales reached a peak of around 17.6 million in 2016 and declined to around 17.3 million last year. Estimates for new vehicle sales this year come in around 17.1 million. The decline is partly because of the reliability of new cars and partly it’s due to the number of cars coming off leases and hitting the used-car market.
Phong Ly, CEO of iSeeCars.com, notes:
The rising popularity of auto leases in recent years has led to an influx of cars coming off lease, creating the opportunity for consumers to find bargains on late-model vehicles. Consumers who take advantage of these best bargains can purchase a three-year-old car for half the price of what it would cost to buy the same car new.
According to the iSeeCars.com analysis, these are the cars that depreciate fastest and are thus the best bargains. Here’s the list along with the average price for a three-year-old car and the percentage depreciation compared with the new car price. Remember the average depreciation for a three-year-old vehicle is 35%.
BMW 5 Series
Average three-year-old price: $30,846
Percentage depreciation: 52.6%
Average three-year-old price: $14,906
Percentage depreciation: 50.7%
Average three-year-old price: $34,010
Percentage depreciation: 49.9%
BMW 3 Series
Average three-year-old price: $24,024
Percentage depreciation: 49.8%
Average three-year-old price: $18,098
Percentage depreciation: 49.7%
Average three-year-old price: $14,011
Percentage depreciation: 48.4%
Average three-year-old price: $13,157
Percentage depreciation: 48.1%
Average three-year-old price: $21,120
Percentage depreciation: 47.9%
Average three-year-old price: $26,291
Percentage depreciation: 47.2%
Average three-year-old price: $26,620
Percentage depreciation: 46.8%
Luxury cars depreciate fastest because they are most often leased when new to keep monthly payments low. That lowers demand for these cars in the used-car market, but they are still too pricey for many buyers.
And which vehicles depreciate slowest? Wait for it … pickups. A three-year-old Ram pickup has lost just 33.2% of its value, a Ford F-150 has shed 32.4% of its value, and a GMC Sierra has yielded just 26.7% of its value. All fall below the 35% average of all vehicles. The average for all pickups is 23.3% depreciation after three years.
iSeeCars.com has comparison charts on SUVs, minivans, and used cars costing less than $20,000, plus more commentary and details on the used-car market.