How Much Does a Car Depreciate Per Year? The Real Numbers Every Buyer Needs

A new car loses value the moment you drive it off the dealership lot — but by how much? Car depreciation is the single largest cost of vehicle ownership, often exceeding fuel, maintenance, and insurance combined. Understanding how depreciation works can save you thousands when buying, selling, or trading in a vehicle.

Use our Car Depreciation Calculator to see exactly how much your specific vehicle will be worth over time.

The Average Depreciation Curve

According to data from Edmunds, Kelley Blue Book, and industry analysis, the average new car loses about 20% of its value in the first year and approximately 49-60% of its value after five years. Here’s the typical breakdown:

Year	Value (based on $35,000 car)	Annual Depreciation %	Cumulative Loss %
0 (New)	$35,000	—	—
1	$28,000	20%	20%
2	$23,800	15%	32%
3	$20,230	12%	42%
4	$18,210	10%	48%
5	$16,390	10%	53%

At the five-year mark, that $35,000 car is worth roughly $16,400 — a loss of $18,600. The depreciation curve is steepest in the first two years, then gradually flattens. This is why buying a 2-3 year old used car is often the sweet spot: you avoid the steepest depreciation while the car still has years of reliable life left.

Depreciation by Vehicle Type

Not all cars depreciate equally. Some brands and body styles hold value significantly better than others:

Vehicle Type	5-Year Depreciation (Avg)	Example
Hybrid/Electric	55–65%	EVs lose value faster due to battery concerns and rapid tech evolution
Luxury Sedans	55–65%	BMW, Mercedes, Audi — higher initial price, steeper drop
Midsize Sedans	45–55%	Honda Accord, Toyota Camry — solid resale
SUVs and Crossovers	40–50%	Strong demand keeps values relatively high
Trucks (Full-size)	30–40%	Resale kings: Ford F-150, Toyota Tundra hold value exceptionally well
Sports Cars	35–50%	Varies widely; some limited editions even appreciate

What Drives Depreciation?

• Mileage: The average vehicle is driven 12,000–15,000 miles per year. Every 10,000 miles above average can reduce value by 10–15%
• Condition: A well-maintained car with service records commands a premium. Dents, scratches, and worn interiors can slash value by 15–25%
• Brand reputation: Toyota, Honda, and Subaru consistently top reliability surveys, and their cars reflect that in resale value
• New model releases: When a redesigned model comes out, previous generations drop in value — often 10–15% in a single year
• Supply and demand: During car shortages (like 2021–2022), used car prices actually rose. In normal times, supply is abundant and values decline predictably

Real-World Scenario: Leasing vs Buying

Scenario: You’re deciding between leasing a $35,000 SUV for $450/month or buying it with a 5-year loan at $650/month.

After 3 years (a typical lease term):

• Lease: You’ve paid $16,200. You return the car. You have no equity, but you never suffered the depreciation hit.
• Buy: The car is now worth ~$20,230 (after 42% depreciation). You owe ~$15,000 on the loan. You have $5,230 in equity — but you also paid $23,400 in payments.

Frequently Asked Questions

Should I buy a new car or a 2-year-old used car?
Buying a 2-year-old certified pre-owned (CPO) car is usually the best value. The first owner absorbed the steepest 20% first-year depreciation, and you get a car that’s still under factory warranty. You save 25–32% off the original price for a car with 80%+ of its useful life remaining.

Do electric cars depreciate faster than gas cars?
Yes — on average, EVs depreciate 5–10% more than comparable gas vehicles over 5 years. The main reasons include battery degradation concerns, rapid technology improvements (newer models have longer range), and lower demand in the used market. However, this gap is narrowing as battery technology matures.

How does mileage affect my car’s value?
Each mile driven reduces your car’s value. A rough rule of thumb: 10–15 cents per mile. If you drive 15,000 miles per year instead of the average 12,000, you lose about $300–450 in additional value annually.

When is the best time to sell my car?
Before the 5-year mark. After 5 years, depreciation slows but maintenance costs increase. The sweet spot for selling or trading in is between years 3 and 5, when the car still has significant value and before major repairs typically begin.

Calculate your specific vehicle’s depreciation with our Car Depreciation Calculator — enter your car’s make, model, year, and mileage to see its projected value curve.