Cars in a parking lot

How Do New and Used Vehicles Depreciate?

New and Pre-Owned Car Depreciation

Vehicle depreciation is an inevitable part of a car’s life. Over time, the car will depreciate slowly or quickly depending on many factors. At Broadway Credit, we will take a look at how new and used vehicles depreciate to help you understand what car depreciation is.

[ View Our Online Used Vehicle Inventory | Contact Us ]

Cars parked in a parking lot

New vs Used Vehicle Depreciation

Did you know that vehicles purchased new will depreciate much quicker than vehicles purchased used? Why does this happen?

First, a vehicle that is purchased new will immediately be considered “used” once the buyer signs the paper for it. Even if the car was only driven for 10 miles, the fact that the car has had a previous owner will significantly drop its value. Another reason for depreciation is usage. The overall value of the vehicle will decrease as miles continue to increase. A third reason for vehicle depreciation is age. As mentioned previously, new vehicles will see lots of depreciation while older cars will see less. Of course, other factors like the vehicle’s condition, fuel economy, and reputation will impact its depreciation. Even driver preferences, like its body style and transmission type, can impact how quickly the car depreciates.

So, how much depreciation can a driver expect? If you purchase a new car, you should expect to lose 10% the minute after signing. After one year of ownership, your vehicle will have depreciated by roughly 20% For every year for the next four years following this steep decline, the car will lose an additional 10% on average per year, with the earlier years (i.e. year 2 and 3) depreciating more than the later years (i.e. year 4 and 5). After the first 5 years of ownership, the car will start depreciating much slower until, one day, it reaches the value of the metal itself.

[ READ MORE: Things to Look for on a Test Drive ]

Due to the nature of car depreciation, drivers looking for the most “bang for their buck” should consider purchasing a used vehicle. At Broadway Credit, we offer dozens of affordable, reliable, and high-quality options to choose from. Check out our current selection online here! Also, don’t forget to browse our blog for more informative posts like this.