How much does a used car depreciate each year?
Typical Depreciation Curve
Depreciation is steepest in the first year, often 20% or more as soon as you drive off the lot. By the end of year three, a car may have lost about 40-50% of its value. After that, the rate slows to roughly 10% per year, depending on the model.
Not all cars depreciate equally. Trucks and SUVs tend to hold value better than luxury sedans. Brands like Toyota, Honda, and Subaru often have slower depreciation, while some domestic and luxury brands drop faster.
- Year 1: ~20% drop
- Years 2-3: ~10-15% per year
- Years 4-5: ~10% per year
- After 5 years: ~40-50% of original value
Factors That Affect Depreciation
Mileage, condition, accident history, and market demand all play a role. A car with high mileage or a branded title will depreciate faster. Limited-production or highly desirable models may depreciate less, and occasionally even appreciate.
Depreciation is not a straight line. Economic factors, gas prices, and new-car incentives can speed up or slow down the rate. For a used car buyer, the sweet spot is often a 3- to 5-year-old vehicle where the steepest depreciation has already happened.
Common mistakes
- Assuming all cars depreciate at the same rate—research your specific model.
- Forgetting that depreciation continues after you buy, so a used car isn't immune.
- Ignoring how options, color, and trim level can affect resale value.
