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Car Depreciation: One Reason you Should Buy a Used Car

Are you a car owner? Like it or not, your car is losing value. Car depreciation affects every car owner. Keep reading to learn how to best mitigate it.

Car depreciation affects every car owner. No matter if you bought a used car or a new, it’s still losing value. Keep reading to learn how to best manage and mitigate car depreciation.

What is Depreciation?

Oxford, the default dictionary that Google uses, defines depreciation as

“A reduction in the value of an asset with the passage of time, due in particular to wear and tear.”

Car Depreciation

Let’s define car depreciation as the difference in value from when you bought the car to when you sell the car, or get rid of it. A car’s value will go down as the years pass by, and the more you drive it.

Factors that cause cars to depreciate

There are a lot of things to consider when it comes to a car’s value and how fast it depreciates. Here are a few of the top reasons for car depreciation.


This is the one most people want to know when they’re looking at buying a used car.

The more miles you put on the car, the less value it will have. Even if they are freeway miles.

The inverse is true as well. Your car will retain its value better with a lower number of miles driven.


As with most things, people want a car that looks good. Any damage to your vehicle will cause the car to depreciate. The more damage, the more its value goes down.

Kelly Blue Book has an option when determining the price of a vehicle where you choose the cars condition. Go have some fun with it and see how condition, along with miles, affects the cars value.

Everyone wants that shiny, dent free car.

No one wants the car with the bumper held on by a bungee cord.

Manufacturer Reputation

I’m not going to name names, but we all know a few makes and models with a bad reputation.

Let’s be real, do you even look at those cars when you’re out shopping for a car? No!

We all want a car that’s reliable, and reputation plays a big factor into our perception of that.

Consumer preference (Supply & Demand)

It’s been in the news a lot over the past year or so. Car manufactures are halting production of sedans, in favor of the SUV.

That’s the reason I’m using a SUV in my example instead of a sedan (which is my preferred choice.)

New Car Depreciation

Ever heard of exponential growth? You know, it’s the path that a graph of compounding interest follows.

Exponential Growth

Well, cars do opposite.

Exponential Decay Example
Image from MathBits

It’s called exponential decay.

Not a math nerd? Okay, stay with me here.

In other words, a car will lose most of its value right at the beginning, and not lose very much towards the end of its life.

That hunk of metal will always hold some value, even if it doesn’t run.

How fast does a new Car Depreciate?

The moment it’s ‘yours’:

You just finished signing all the paper work and dealing with the pesky sales person and “Finance Manager”.

You’ve been handed the keys and as you open the door, you get a whiff of that new car smell.

Feels so good to have a brand-new car, doesn’t it?

You’ve adjusted your seat, and you’re still working on getting those mirrors set to the right angle as you drive off the lot.


Your car just depreciated by 11%

Still feel as good?

One Year Ownership

You’ve broken in your car now, and that new car excitement has worn off. You probably still enjoy your car, but maybe you don’t.

Knowing that your new car has lost 25%, or one quarter of its value, will certainly help curb that enjoyment.

Three Years Ownership

Your car will continue to lose around 20% of its value every year. That means after three years of ownership, that new car you bought is now worth 40% to 50% of what you paid for it.

Five Years Ownership

It’s been five years, 75,000 miles on the average car by now, and your car has now lost over 60% of its value.

Fortunately, the five-year mark is where car depreciation starts leveling out. That’s why I recommend buying a car around this age, if you’re willing to be seen in such an old car. 😛

Here’s a graph to help you visualize what car depreciation looks like. Notice the extreme loss in value at the beginning, and how much it tapers off after 5 and 10 years.

Car Depreciation Curve

New Car Depreciation Example

Examples are often helpful, so I’ve decided to make an example out of the most popular class of car right now, the SUV.

I choose a Nissan because that happens to be a brand I like, and I choose a Murano as the model. Nissan Murano is their mid-class SUV.

Notice how I didn’t even look at the brands I don’t like? See, reputation does matter!

Off sopping I went. Online, of course, but stayed local to the Dallas-Fort Worth area.

One Year Ownership – 2019 Model

I went shopping for a model that was one year old to reflect how much value it lost when selling a vehicle after one year of ownership.

I started with a dealer I’ve been to, that I know to be reputable., and found this beauty.

2019 Nissan Murano
2019 Nissan Murano Info

A 2019 Nissan Murano SL listed for $27,794, with around 15,000 miles.

If you ever bought a car, you know the list price is usually more than what they are willing to take for the car.

However, we’ll stick with that value.

The mileage is close to the 15,000 a year average. Also, it appears in excellent condition.

The second piece of information we need to know is what these cars sold for when new. I went to true car and found that MSRP was about $43,000.

However, the average price paid for a new 2019 Nissan Murano SL, with similar specs to the one I found, sold on average for $35.622.

So, how much car depreciation is that in one year?

(1 – ($27,794/$35,622)) * 100 = 78.02%

This Murano is being sold for 77% of what the average new Murano was sold for, meaning a loss in value of ~22%.

That’s about on par with the 25% we expected. A little better, but close.

Five Years Ownership – 2015 Model

I did the same shopping for a 2015 Nissan Murano, and found this guy.

2015 Nissan Murano

A 2015 Nissan Murano Platinum listed for $17,700, with around 67,000 miles.

If you ever bought a car, you know the list price is usually more than what they are willing to take for the car.

However, we’ll stick with that value.

The mileage is as close to the 15,000 a year average I could find for a Murano in very good condition.

The second piece of information we need to know is what these cars sold for when new. I went to Autotrader and found that MSRP was about $40,400.

Autotrader doesn’t provide the information about how much the sold for on average, but we’ll guess a little less and say $37,000.

So, how much car depreciation is that in one year?

(1 – ($17,700/$37,000)) * 100 = 47.84%

This Murano is being sold for 48% of what the average new Murano was sold for, meaning a loss in value of ~52%.

That’s better than the 60% we expected, but again, not far off. This Murano has lost over half of its value in five years.

Used Car Depreciation

We learned that a new car loses a LOT of value over the first five years of ownership. The car depreciates on average 50-60%


What happens over the next five years though?

As we get further into the curve shown above, we saw that depreciation slows down. And not just a little. It’s a dramatic difference.

A 5-year-old car, will lose only 20% of its value over the next five years.

Used Car Example

For this example, we’re going to look at a car I actually own.

The 2010 Nissan Murano LE

According to Kelly Blue Book, this vehicle went for somewhere between $37,000 and $43,500 when it was new in 2010.

In 2015, using the expected car depreciation values calculated above, I would expect this 2010 Murano to cost somewhere in the range of $18,500 to $22,200.

However, I didn’t buy mine in 2015. I bought it in 2018.

I paid a total of $10,000, and it had a little less than 90,000 miles on it. Not bad for an 8-year-old car. That’s an average of around 11,000 miles a year.

That means this 8-year-old car, with below average number of miles in excellent condition sold for 73% off its brand-new value.

In other words, I only paid 27% of what it cost to buy it new. Nearly a quarter of the price.

What is the used cars value now?

Using the depreciation percentages I previously stated, we would expect the vehicle to have a value of around 30 – 40% of its original value.

Yes, I know that’s more than what I paid for my vehicle, but in my opinion, I got a good deal. Also, that is just averages.

Kelly Blue Book estimates that the resell value of my car to a private party (not a dealer) is between $5,346 – $8,719, with an average of $7,033.

Looking at actual listings, the 2010 Nissan Murano LE seems to be selling for between $9,000 and $9,800. A little higher than KBBs estimate. This indicates that there is demand, as well as the low inventory.

Used Car Depreciation Savings

If we take the low value of $9,000, that means this model is now selling for 76% off the new price. Slightly less than a quarter of $37,000.

Now if you had bought this car when it was 5 years old, it would have cost you $18,500.

Either way, you could still sell the car for around $9,000.

Cost per Year Buying New

The total this vehicle would have cost if you sold this Murano today is

New Price - Today’s Price = Total Cost
$37,000 - $9,000 = $28,000

The Cost Per Year is

Total Cost / # of Years = Cost Per Year
$28,000 / 10 Years = $2,800

Cost Per Year Buying 5 Year Used

New Price - Today’s Price = Total Cost
$18,500 - $9,000 = $9,500

The Cost Per Year is

Total Cost / # of Years = Cost Per Year
$9,500 / 5 Years = $1,900

That means buying this particular 5-year-old used car saves you almost $1,000 dollars a year!

Cost Per Year Buying 8 Year Used

In my case, I bought an 8-year-old vehicle. Doing the same math, my Murano is only costing me $500 a year.

That’s less than One Fifth the cost of buying this vehicle new!

Totally worth it if you ask me.

Car Depreciation by Year

I took the car in our example, the Nissan Murano SL, and compared what each model year is valued at today. I used Kelly Blue Book to gather this information.

Cost per year was calculated from knowing what each model year is valued at.

Looking at this data, it makes it easy to see when the car depreciation has slowed down from an intense pace to a more reasonable decline.

The Nissan Murano SL has been on the market every year since 2003, except one. There is a hole in 2008 because the Murano was not produced that year.

Car Depreciation Chart

Car Depreciation Chart

Car Depreciation Graph

If you’re a more visual person (I am!), here is what that table looks like turned into a graph.

Car Depreciation Murano Graph

From the graph, we can see if you bought a car this year, it is going to lose a major portion of its value over the first year. In the case of the Murano, that is almost $10,000, or about 23% of its value. Ouch!

If you want a fairly new car and are willing to pay a higher depreciation cost for it, but don’t want the initial drop, there is a sweet spot from years 3-5. Sell the car before the sixth year to avoid a spike.

From what I’ve seen, this spike is pretty common. I don’t have an explanation for it though. If you do, let me know in the comments!

The final piece of information to note is that depreciation hits a slow slope starting at year 7. That means if I was looking to by a Murano today and avoid the worst depreciation, I would look for a 2014 Murano or older.

I went and looked at 2014 Murano SL’s for sale after I determined this was the prime year to start buying. I was already on KBB, so I used there used car listings. There were only 2 listings of 2014 Nissan Murano SLs within a 75-mile radius.

I figured I was being a little picky, so I expanded to include all 2013 & 2014 Nissan Murano’s. This resulted in a total of 17 listings.

The point is that there are used models available and they are reasonable priced. Many with well under the expected 90,000 miles.

Car Depreciation Calculator

In case you don’t like doing the math, here is a calculator you can use to see how much your vehicle of choice may depreciate. It has some built in assumptions, but some variables are adjustable.

Car Depreciation Calculator

Managing Car Depreciation

Once you have bought the car, you now want it to depreciate a little as possible. While there is nothing you can do to stop time (If there is, I want to meet you. Maybe.), here are a few helpful tips that are in your control.

Sell to a Private Party

Car Depreciation is only realized when you go to sell your vehicle. This means you don’t feel its effect until you sell the car.

In the examples above, the Murano was depreciating yearly, but it was only “realized” when we went to sell it.

Notice that I choose to sell it to a private party. It may be a little more hassle than going to a dealer, but it will put a lot more money in your pocket.

If I had elected to take the Murano to a dealer, I would have only been able to sell it for $4,224. And good luck trying to negotiate a dealer paying you more. They are a business and solely in it for the money.

KBB Dealer Value

I would have lost half of the vehicles value by taking it to a dealer to sell!

Avoid After-Market Changes

It’s just like a house, where you want it as bland as possible to be attractive to the most buyers, therefore increasing value and how fast it will sell.

Adding bright lights that shine under your car, called underglow or ground effects, are only attractive to a limited crown. The same goes for the noisy mufflers. If you add these types of modifications, you are limiting the number of potential buys to only those with your exact preferences.

Another turn off to buyers who see after modifications is that they will questions the quality of the work done. Was it correctly installed?

In some states, they might even be asking, “Is it legal?”

Stick with the options you can find straight from a manufacturer, or those that can be easily removed without damage to the car when its time to sell it.

Don’t buy luxury or electric

Following the same logic as after-market changes, luxury and electric cars only appeal to a small group of people.

According to a 2018 survey, conducted by, the two vehicles with the highest depreciation over 5 years are electric powered cars.

The Nissan Leaf and the Chevy Volt.

Completing the list are several high-end makes, including BMW, Mercedes, and Jaguar.

Maintain your car

Oil changes may be the single most important thing you do to increase the longevity of your car.

Following your car’s maintenance schedule, and being able to prove it, will increase your cars value when it comes time to sell.

Sure, not all buyers will ask for records, buy savvy buyers will.

There are also the auto savvy buyers that can check the oil and be able to tell how well it’s been maintained.

Maintenance will even save you money over time.

Follow your manufacturer’s maintenance schedule and your car will last a really long time.

Arguments in favor of buying a new car

Argument 1: New car loans have better rates

Well, for beginners, if you have to take out a loan to get the car, you probably shouldn’t be buying it in the first place.

Aside from maybe a mortgage, I never recommend a loan.

Related: How we Paid Off our California House in 3 Years Before Turning 30

In the case of buying a car, I would recommend buying a vehicle that you can afford to pay cash for.

Take what you would have been paying in monthly payments on that new car, and stash it away in a savings account.

You will be surprised how fast a monthly car payment adds up to a substantial amount.

According to, the average monthly car payment in America is $550 for a new car or about $400 for a used car.

If you saved $550 every month for a year it would add up to $6,600. That will buy you a decent used car.

Another thought to keep in mind is that the average loan term for a new car is 69 months!

That’s over 5 and a half years!
Let’s say you were able to save $550 over the course of 5 years. That would add up to $33,000!

Imagine how nice of car you could buy with that and still have money left over to invest?

Sure, you might have some car maintenance over that 5 years of savings. So, let’s say that cost $3,000, and you were left with $30,000 in the bank. I think you could still manage to do okay with that.

What if you invested that money?

Here is another way to look at it

If you invested that $550 every month over your working life, we’ll say 40 years (20 years old to 60 years old), you would have well over a million saved up.

Exponential Growth From Investing

Yes, this is the same graphic I used at the beginning of the article. Seemed appropriate. I am assuming a 7% rate of return.

Argument 2: Depreciation doesn’t matter if you drive the car till its dead.

Let’s take a look at the numbers again.

The average car today last around 200,000 miles or more. If it is driven the average 15,000 miles per year, the car is estimated to last 13.3 years. Let’s say it last a little longer, and round up to 14 years.

Let’s continue to use the Murano as an example.

A 2020 Murano with 0 Miles is expected to last 14 years. A New Murano cost $37,000

A 2015 Murano with 75,000 Miles is expected to last 9 years. A 5-year-old Murano cost $18,500.

A 2010 Murano with 150,000 Miles is expected to last 4 years. A 10-year-old Murano cost $9,000.

In other words:

A New Murano cost $37,000 every 14 years.

A 5-year-old Murano cost $18,500 every 9 years.

A 10-year-old Murano cost $9,000 every 4 years.

If we calculate the cost per year, we see:

A New Murano cost $2,643 per year.

A 5-year-old Murano cost $2,055 per year.

A 10-year-old Murano cost $2,250 per year.

The following formula was used to calculate these numbers

Total Cost / # of Years = Cost Per Year

We start to see that there is a sweet spot for when to buy a car. You don’t want new, but you also don’t want a car that is too old.

We still see the depreciation does matter. An old car is still cheaper than buy a new car.

Used Car Depreciation – Lessons Learned

Used Cars save you money

In the case of a Murano, we saw that buying a 5-year-old model would save the owner nearly $1,000 dollars a month.

Depreciation Slows Down

Depreciation slows down after the first few initial years. It’s most beneficial financially to buy your car after it has stopped losing value at such a rapid pace.

Don’t Buy Too Old & Used

We saw that it starts costing more per year to own a car once it hits a certain age. I haven’t done the research or math to have enough information on when a vehicle starts costing more, but I do have enough information to know that you should sell it before 200,000 miles, the average life span of a car.

Also, as I mentioned previously, there are not that many people looking for a really old car. That will make the vehicle hard to sell.

More Benefits of Buying Used

Here are a few more reasons to consider buying a used car, each deserving of their own post.

  1. Save money on insurance
  2. Cheaper Taxes & Registration Fees
  3. Data – Reliability, Vehicle History Reports

My Car Buying Recommendation

Using the knowledge gained from the points made in this article, I would recommend buying a used car somewhere between 4 to 7 years old, with below average mileage. Take the model of car you are interested in, and create your own graph or table like I did. It will make it simple to see when depreciation has slowed down.

When buying, ask for the maintenance records and any receipts the previous owner may have. If you know how to check the oil, do that. Look for indications that it has not been changed often.

If you are not auto savvy, ask to take it to a mechanic for an inspection. It may cost a few bucks, but is well worth it in the long run.

You will be less likely to end up on the side of the road, having to pay towing and repair bills!

And Lastly,

Sell your car before it’s too old!

There are a lot of other factors that affect car ownership not discussed in this article. I tried to keep it laser focused on car depreciation as much as possible.

If you have any other comments or questions let me know in the comments below.

What are your car buying tips?

How many miles do you have on your car?

FIRE Away!