Common Misconceptions About Car Depreciation

The idea that every new car sheds a precise 20% the moment it leaves the dealership has been repeated so often it feels like a law. In reality, initial depreciation depends on the vehicle's transaction price versus its immediate private-market value, supply and demand for that specific model, and whether the car is in high or low inventory. Some in-demand models hold their value unusually well right after purchase; others may depreciate more steeply. The figure varies — sometimes dramatically — from one model to the next.

Depreciation is not a one-time event tied to the new-car transaction. A three-year-old vehicle will still lose value as it becomes a four-year-old vehicle, then a five-year-old one. The rate typically slows compared to the steep early-year drop common with new cars, but it does not stop. Condition, mileage accumulation, and evolving consumer preferences all continue to exert downward pressure on value over time. For a deeper look at how new and used purchases compare overall, see New Car vs. Used Car: What the Decision Actually Comes Down To.

Pickup trucks, certain SUVs, and models with strong reputations for reliability have historically retained value better than average. Luxury sedans and vehicles in segments with oversupply often depreciate more quickly. Factors like fuel economy, brand perception, safety ratings, and even color can influence resale values. Treating depreciation as a uniform phenomenon leads buyers to underestimate the long-term cost differences between otherwise similar vehicles.

Early electric vehicles did depreciate quickly, partly because of range anxiety and a thin used-car market. That picture has become more complicated. Some EV models have shown strong value retention, while others continue to depreciate steeply — often tied to factors like battery warranty terms, range capability, charging infrastructure, and available tax incentives on new models that can suppress used-EV prices. Blanket statements about EV depreciation do not reflect the current diversity of the market.

Low odometer readings help, but a low-mileage vehicle with a spotty service record, cosmetic damage, or in a segment that has fallen out of favor can still command a disappointing price. Buyers and appraisers look at the complete picture: maintenance documentation, accident history, interior and exterior condition, and whether the model is one the market actually wants. A well-maintained higher-mileage vehicle from a desirable model line can sometimes outsell a neglected low-mileage car in a less popular segment.