How Much Does a Car Depreciate Per Year?

Depreciation is the difference between what you pay for a car and what it is worth subsequently. Most of us know that cars lose value over time, depending on factors like:

• Age: the older a vehicle gets, the more it loses value
• Mileage: wear and tear from mileage is a major factor
• Make and model: the least depreciating cars include Toyotas, Hondas, Chevy Corvettes, Ford Mustangs, and the Jeep Wrangler
• Some BMW models, the Maserati Ghibli, and Nissan Leaf have the highest depreciation rates

What Causes Car Depreciation?

How much value a vehicle loses, and how quickly, is highly variable. You’re probably aware depreciation begins the minute you drive a new car off the lot, and that you can lose as much as 20 percent of value (or more) within the first year.

Fortunately, there are some things you can do to try and mitigate depreciation. The more value your vehicle retains, the better for you when it comes time to sell or trade. Maximizing your vehicle’s value requires:

• Regular Maintenance: stick to your manufacturer’s recommended maintenance schedule by getting regular car fluid changes and keeping your vehicle in good overall condition
• Watching Your Mileage: the fewer miles you put on a vehicle, the less it will depreciate, so try to stay within the national average of 14,000 driving miles per year.
• Keeping Clean: it makes sense that the better you take care of a vehicle, the less depreciation it’ll sustain, so keep it looking clean and shiny (also, avoid loud or unusual colors and stick with gray, white, silver, black, etc.)

Salvage Title Depreciation

Hurricanes and hurricane damage have become annual events. Under these circumstances, salvage titles take on special importance. A salvage title is assigned to a vehicle that’s suffered major damage in a flood or some other type of accident. It usually indicates that a vehicle is so damaged it would cost more to fix than the vehicle is worth, a “buyer beware” that a prospective car owner should definitely know about.

In most states, damage must equal at least 75 percent of the vehicle’s total retail value to warrant a salvage title. Such a vehicle must be fixed, inspected, and declared safe before it can be driven again. You can either sell such a vehicle outright to someone willing to cover repair costs, you can keep and fix it yourself, or sell it for scrap metal.

Car Depreciation Curve

There are depreciation models that’ll tell you a vehicle’s year-over-year rate of depreciation. For example, a car depreciation curve that shows a vehicle that loses the expected 20 percent of its value in the first year and 40 percent by its fifth year will depreciate at an annual rate of roughly 15 percent.

There are also key metrics to bear in mind in determining salvage title depreciation. These include the length of a vehicle’s useful lifetime and its salvage value (the amount for which a vehicle can be sold at the end of its useful life). According to AutoSavvy, these metrics reveal an interesting similarity in that there is a point at which new vehicle and salvage title depreciation decline converge.