Vehicle age, mileage & depreciation
How does depreciation work?
Cars depreciate. They lose value. Your goal is to buy a used car that’s already done its bulkload of depreciation. Is it possible? Sure is.
First, you’ve got to understand how depreciation works. Let’s say you buy a new car for $34,968, the estimated average transaction price for light vehicles in the U.S. in 2017, according to Trusted Choice Insurance.
As soon as you drive off the lot, the car is worth $31,121. That’s an 11% decrease in value.
When it’s time to celebrate your car’s first birthday, your car will have decreased in value by 25%. It’s now worth $26,226.
At three years old, your car’s value will have decreased by a whoppin’ 46%. It’s worth $18,882.
And five years later? Your precious ride is worth a mere $12,938. It’s value will have decreased by 63%.
Keep in mind that depreciation isn’t an exact science. Some depreciation factors can’t necessarily be measured in dollars and cents. A brand, color, or vehicle type can unexpectedly fall out of favor with the public, making a car that’s only one or two years old unattractive to many buyers.
Gauge the age. Find your sweet spot.
Buying a used car that’s juusstt the right age can help you beat the biggest slump in depreciation. Let another driver take the biggest hit so you don’t have to. According to various car buying and selling resources, including Edmunds, Consumer Reports, and U.S. News & World Report, the “right age” can vary greatly.
One to two years old – Edmunds recommends buying a car that’s one or two years old, driving it for three years, and then selling it before the next big price slump. This might be a good option for drivers who love having the latest gadgets and don’t mind maintaining a car payment.
Two or three years old – According to Consumer Reports, two- and three- year old used vehicles have already taken the biggest depreciation hit. Continuing ownership expenses, like insurance and taxes, are still a bargain, and you still get to drive a vehicle with most new modern amenities.
Up to 10 years old – After gathering data on depreciation, problems, and repair costs for cars from one to 10 years old, U.S. News & World Report found that even 10-year old cars cost more in depreciation than they absorbed in repair bills.
Whoa, whoa. Read that again. They found that even 10-year old cars cost more in depreciation than they absorbed in repair bills. That means to some degree, you don’t necessarily have to worry about a car’s age being a burden.
Their analysis shows that the best way to find the cheapest used car is to buy the oldest modern car that you can still find running and in good condition. For the best safety features, stick to cars that are 2012 and newer. That’s the year electronic stability control became mandatory for all cars.
In the end, U.S. News & World Report suggests “buying as old a car as you’re comfortable driving that’s in good condition and reflects diligent care form the former owner.”
With most modern, relatively well-maintained cars, age is just a number. Ah, thanks for the wisdom U.S. News & World Report.
Want specifics on a used car you’ve been eyeing? You can actually calculate the depreciation of any car using the car depreciation calculator. Just enter in the purchase price of the vehicle, it’s current age, and the number of years you plan on owning it. The calculator will tell you the annual, total depreciation and estimated value of your vehicle at the end of the ownership.
Consider maintenance over mileage.
If age is just a number, is mileage a big deal when buying a used car?
Most drivers average 12,000 miles per year. If the used car you’re looking to buy has far more average miles/year than that, start asking the owner or dealer questions. How and where was the car driven? Why so many miles? Was the vehicle regularly maintained during this time and do you have the service records to prove it?
Typical used car mileages
- One to two years old: 12,000 to 24,000 miles
- Three to four years old: 36,000 to 48,000 miles
- Five to six years old: 60,000 to 72,000 miles
- Seven to eight years old: 84,000 to 96,000 miles
- Nine to ten years old: 108,000 to 120,000 miles
If the previous owner can show that the car has been continuously well-maintained, a few extra miles here and there doesn’t need to be a deal breaker. Like U.S. News & World Report said, the best way to find the cheapest used car is to buy the oldest modern car that you can still find running and in good condition “and reflects diligent care from the former owner.”
Find your best used car (and your best used car financing)
There is such a thing as the “used-car-buying-sweet-spot.” It’s just different for different drivers. Once you’ve found a used car you feed good about driving, whether it’s two years old or five, apply for a used car loan through myAutoloan. You’ll receive up to four financing offers and can choose the best finance rate for you.