Buying a new car is always fun and exciting. You get to walk the lot, check out all the cars that catch your eye and then you get to start the process of trying to haggle over the price with the dealer. If you know what to look for, you can find a great deal and get a killer price for an almost new car. The best deal is not always the car on the lot with the lowest price tag. Instead, sometimes the biggest score for a car buyer is to find the car on the lot that has depreciated the most in the shortest amount of time. The average car depreciates in value by 35% in the first three years. Some cars depreciate slower or fast than that too. In fact, there are some cares that managed to lose between 46 and 53 percent of their value during the same period of time. That’s terrible news for the drivers who bought these cars new, but it could mean that shoppers who are in the market for a used car can find themselves with a unique opportunity to get some significant savings on some almost new cars.
With car sales but up and over where they were at their pre-recession levels, many car manufacturers are not offering the same amazing incentives they were during the recession to try and incentivize people to by their cars. So it’s getting harder and harder for car buyers to find great deals when it comes to buying a new car. However, if you are willing to buy used, like-new cars then because of the depreciation factors for some of the top brand name cars, you can actually find an almost like-new car for in some cases, 53% off the brand new price. It’s a total win for the used car buyer. We wonder how painful it was for the original owner that bought it new and drove it off the lot. That had to hurt.
There is an auto-shopping website called iSeeCars.com that did a study. They first analyzed over 6 million vehicles sold between Aug. 1, 2017, and Jan. 24, 2018. They knew that new cars depreciate the most in the first year that they are driven off the lot. But they really wanted to study and see which cars actually depreciated the most and which ones had the biggest price differences between their new models and slightly used models. They were on a mission to determine which cars dropped the most quickly compared to their new models. So they then analyzed 15.7 million cars for sale and found that the average difference in cost between new and almost new was pretty substantial at 17%. They also studied another 4.1 million cars to try and determine which ones depreciated the fastest over a three-year period. They chose a 36-month period because it was a common lease term, and that means that it’s at the three year mark that a lot of cars that are now off-lease start showing up on car lots for sale across the nation in the used car market. Based on this study, it was fascinating to see the top ten cars that lost the most amount of value over the three-year period were:
- BMW 5 Series- 52.6 percent
- Volkswagen Passat- 50.7 percent
- Mercedes-Benz E-Class- 49.9 percent
- BMW 3 Series- 49.8 percent
- Ford Taurus- 49.7 percent
- Chrysler 200- 48.4 percent
- Volkswagen Jetta- 48.1 percent
- Audi A3- 47.9 percent
- Cadillac SRX- 47.2 percent
- Buick Enclave- 46.8 percent
We will give you more information about these particular cars in just a moment, and we will give you information about some other makes and models that also had a good amount of depreciation, but it’s interesting to see a list that comprises the top ten vehicles with the most depreciation over a three year period. On one hand, it seems like these are good cars to avoid buying new. You may as well not take the large ding in value as soon as you drive it off the lot new. On the other hand, it seems like some of these cars would be a great value buy if you were willing to buy them a couple of years old once people were turning them in after their lease was up. You still get a great vehicle for almost half the price and you still have a nearly new car. It’s something to consider for sure.
There are a lot of reasons that these cars may have ended up on this list. It’s not that there is anything inherently wrong with these cars. And a lot of people assume that the cars whose prices hold up the best over time are the best cars to buy, which is also not always the case. There are so many factors that may have gone into why a car depreciates or, on the other hand hold their value when others didn’t. The used car market just like any other market is prone to supply and demand. Prices are set a lot of times based on demand and there are a lot of factors that go into assessing why one car is in demand more than another. Some of the cars that had the biggest price drops dropped because the car was re-designed for a new year. As soon as that happens, it instantaneously makes the year old model appear dated and weakens the demand for them. Other cars look almost identical to their newer year models and so they hold their value better and have a higher demand for them. Some other factors that go into determining the demand and price difference for vehicles are reliability, lower popularity compared to it’s competitors, expensive repairs, dependability issues or falling out of favor with the population.
For example, on the list above of the 10 most depreciated cars over a thirty-six month period, you will see that there are several sedans and luxury cars on the list. The reason there may be so many sedans is because the sedans have rapidly been declining in popularity because right now the most popular cars in America are the Trucks and SUV crossovers. So, if you are in the market for a new sedan, then you have some amazing options available to you that can be had for a great deal! Understanding the difference in price between a new car and one that is slightly used can be a powerful tool when a consumer is trying to make a decision about what car to by next. Especially in this market, where you can by a car that’s a year or two old that has low miles on it and all of the features on it that are available on the brand new model, for a drastically lower price. We’d suggest you always take into consideration how quickly a car might depreciate and take a look at all of the certified pre-owned options that are offered through the dealers. You can find a great car for a lot less money that still comes with a killer warranty. It’s almost a no-brainer.
Also, luxury cars historically have declined in value faster than the industry average. Something you will want to keep in mind if you are shopping for a luxury car is its reliability. Mercedes-Benz, Audi and BWM historically have high repair and maintenance costs. If you are worried about shopping for a luxury car and its reliability and repair costs, you may want to consider shopping for a certified pre-owned luxury car that comes with a dealership or manufacturers warranty. The last thing you’d want to do is save a bunch of money by buying a slightly used luxury car; just to have all the money you saved eaten up by repair and maintenance costs if something goes wrong. Having a warranty as mentioned above will give you some serious peace of mind. Another thing to notice about the list is that all of them are either German or American brands. It looks like the Asian brands that are known for holding up and keeping their values really do, at least according to this particular study. Japanese models have long been known to hold their value and have high resale. If you want to buy a brand new car off the lot, you may be better off going with a Korean or Japanese brand. If you want a high-end luxury car that’s new, you may consider an Infiniti, Lexus or Acura. If you choose one of these brands, you will probably have less of a depreciation hit than if you chose the Mercedes-Benz, Cadillac, or BMW. But, again, the argument could be made that if you are looking for a slightly used luxury car, there may be a bargain in buying one of the luxury brands on the list. We’d just suggest you really dive in and do your homework and make sure the brand you are looking to buy is really the car that you want and is right for you.
Now we want to give you a run down for what you might be looking at if you are planning to purchase one of the cars on the list. We will also include some other cars too for comparison sake that didn’t end up on the list for top ten, but still are worth noting.
The Cadillac SRX is on the list of fastest depreciating cars. We think it’s on the list because SRX has been discontinued and replaced by the XT5. The last year model you can purchase is a 2016. They start at $36,060 and offer the same warranty as the Buick since it’s another GM brand. So it comes with a 50,000 mile or 4 year basic warranty. The opportunity to buy one still under warranty is coming to a close because it’s been discontinued, so if you want one with a warranty on it, then you’d better act fast.
The other GM brand on the list is the Enclave, which starts at a base price of $40,000. It’s got the same GM warranty of 50,000 or 4-years on the car, with an additional 6-year, 70,000-mile warranty on the power train. The Enclave was totally updated for 2018, so it’s no wonder that the older models are less in demand and depreciating. If you bought this car three years old with average miles on it, you’d still have some of the warranty intact for the first year of ownership, which could be a plus.
The Volkswagen Jetta starts at $18,545. Not too shabby, and if that’s the case then you can pick up a three year old version of the car for under $9,000. That’s actually a pretty good bargain. Another interesting incentive to buy one of these is the 72,000 miles or 6-year warranty; whichever comes first that is on the car. That means you could purchase this car for half off with half its warranty left. That’s not a bad deal at all.
The Ford Taurus starts at $27,690 and is about to be discontinued. There is a 36,000-mile/ three year bumper-to-bumper warranty on it. If you purchase it three years old you can get a lot of car for less than $15,000. It’s a step above the smaller Fusion, Fiesta or Focus, which are three more cars that are going away soon too- but at least the Taurus can offer you a full-sized car.
The Audi A3 comes with a 50,000/4-year warranty that will cover this small sedan. It starts at $31,950. They aren’t always the cheapest to fix or repair, but it will probably be a non-issue if you still have some of the warranty to cover it. At least for the first year.
The Chrysler 200 started at $22,115 when new, but has recently been discontinued. It also had a 36,000-mile/three year warranty that made it look like a decent choice. But if it’s been discontinued, and it’s out of warranty- we probably wouldn’t suggest going for one of these. Who knows what your costs could be in the long run. Proceed with caution.
The Volkswagen Passat is a mid-sized car that starts at $22,995 new. It also has the Volkswagen 6-year/72,000-mile warranty. Honestly, it’s a pretty good buy for the money. It’s a decent size, pretty comfortable and spacious and gives you a lot of car for the money, especially if you buy it a couple of years old for a lot less and with a warranty still intact. You can save a lot of money and get a really nice car if you choose to look into a nearly new Passat.
The BMW 3 Series starts at $34,900. The 50,000-mile/4-year comes standard with the car so if you purchase one that’s a couple of years old, you should still have some warranty intact. The 3-Series is one of the more popular BMW’s and they do look nice-but if things suddenly take a turn for the worse and you aren’t covered with a warranty, you could be in for an expensive experience. Take that into consideration. While we are talking about BMW, the 5 Series is also on the list. It comes with the same warranty as the 3 series. It is hard not to want to purchase a used one that looks awesome and would cost half the amount of a brand new one. Again though, it’s a total gamble. If something happens and goes wrong and there is not a warranty in place, your BMW savings may go out the window in repair and maintenance costs. Oh, and it also starts at $52,650 for a new one. It’s one of the more expensive cars on the list.
The Hyundai Genesis was supposed to be an amazing luxury car (and maybe it still is), but it has an astounding depreciation loss in just one year. In fact, if you are going to buy one and are willing to choose a year old model instead of a brand new one off the lot, it can save you up to nearly $17,000. That’s a lot of cash. It’s still almost brand new, but you are getting it for a total discount. Who says patience doesn’t pay off?
It’s the same thing for the Chevy Impala. If you are looking to buy one of these, exercise a little patience and find one that’s just a year old and you can save $10,000. That’s a nice savings while not having to sacrifice all of the benefits or features you were wanting in a car. While you can’t do anything to avoid depreciation on your vehicle, you certainly can choose to make a car purchase that will position you in a place where you can take advantage of the natural depreciation of a vehicle and let it benefit you instead of it being a painful experience because you are driving a vehicle that is now not worth what you paid for it. Also, other ways to help keep the value of your car is to keep up on the regular maintenance on your vehicle. Make sure it’s cleaned, washed, covered with a waterproof car cover and all standard maintenance items and oil changes are done on time, every time. Doing these things will keep your car in tip top shape and will help you keep the most value in your vehicle for as long as possible.