Post Date: Tuesday, July 31, 2018
|A recent hail storm totaled my car. This made me very sad
because I really loved my car. At any rate, I had to subsequently buy a car,
but I am leery of purchasing new cars because of the massive depreciation
suffered in the first few years. Car shopping to me is fairly tortuous, but my
son is a total car guy—an oddity, because I am not particularly interested in
cars. That said, we got into a discussion about which cars hold their value the
best, and that set me on a whole quest to compare cars and their depreciation.|
As it turns out, that is a more difficult question to answer
than you might think! There is no free and available data out there comparing
car depreciations. Ultimately, I had to code a tool to gather data from
autotrader.com for various make and model cars across different years. Of
course, prices vary within years as well as across, so I pulled 10 prices for
each year to get a sense of the range of prices. For fun, I made this program
available online so that you can run these comparisons yourself.
Battle of the SUVs
One of the most popular cars in America is the SUV. My wife
loves the Chevy Tahoe, in particular. Of course, the Tahoe is not a cheap car.
Like all vehicles it carries fairly heavy depreciation in the first few years
When compared to its competitor, the Ford Expedition, the
numbers become more informative. In the chart, the Tahoe is in yellow and the
Expedition is in blue. Note how they both follow the same depreciation pattern,
losing about half their value within the first five years.
What is more interesting, however, is how their values hold
up after that initial drop. What we find is that the Expedition’s depreciation
begins to follow a fairly straight line, while the Tahoe continues to drop
If, like me, you’d prefer to avoid heavy depreciation by
buying older cars, you’d do better to buy a six-year-old Expedition instead of
a similarly aged Tahoe. Interestingly, we see a similar pattern with the Ford
Explorer when compared to the Tahoe, but I’ll let you pull that comparison
Truck Head to Head
Shifting gears a bit (pun intended, obviously), let’s look
at truck comparison: the Ford F-150 vs the Chevrolet 1500. In this intriguing
chart, the F-150 is in blue and the Chevrolet 1500 is in yellow. What we notice
is that, once again find a similar depreciation curve in those first five years
(though the Ford value change is a bit softer than the Chevy).
However, the Ford curve after those first eight to ten years
shifts dramatically. In a very unexpected turn of events, the F-150 begins to gain value in the 12 – 15 year old
range! This is more than a simple anomaly, as you can clearly see the blue dots
are generally higher than the yellow—it isn’t just one or two vehicles skewing
It seems reasonable to conclude that used Ford F-150s just
maintain their value better. And, those that survive to old age seem to age
like a fine wine, actually gaining in value a bit. Just for fun, here is the
comparison of the Chevrolet 2500 and the Ford F-150.
Of course, I looked at both Toyota Camrys and Nissan Altimas
when car shopping. To be honest, the depreciation curve on these cars is as ordinary as shopping for them—pretty standard and nothing unexpected. I mention
them since these are very popular cars, not to mention, they hold their value
about as well as anyone could expect, even though they both still lose about
half their value after five years. In the chart, the Nissan Altima is in Yellow
and the Toyota Camry is in Blue.
German Sports Sedans
I was always advised against buying an older German sedan,
largely because they are expensive to fix. However, I found that this advice
may not be entirely sound. In fact, the BMW-Audi rivalry may here and now be
settled as we look at their pattern of depreciation (okay, that was an
In these charts, the BMW 5-series is in Yellow and the Audi
A5 is in Blue. Though the Audi A5 and BMW 5-series start at the same price, the
Audi loses value much faster over those first five years. In fact, it takes
almost eight years for the BMW to depreciate by half, while the Audi does it
about four. What is most interesting to my car-buying question, however, is the
period of little depreciation for the BMW: the 8 to 13 year window where the
5-series loses almost no value!
I admit, this is a surprising result—in a period when the
Audi loses about $20,000 in value, the BMW moves about $2,000. That said, the
BMW gives it back during the 15 to 18 year-old period. Even so, that if I’m a
value buyer, that might be a good target zone.
Just for Fun
As I mentioned, my son is a car guy. His favorite debates
are about sports cars, so I had to include some sports car data to appease him
(and to win a debate). Here is the depreciation for a Porsche 911 compared to a
Corvette. The Porsche is in Yellow and the Corvette in Blue.
This is what I find off-putting about Porsches. Notice how
the prices are all over the place for Porsche. That a 911 may cost $350,000 or
$90,000 does not translate into brand consistency. Not that I would, but if I
were to spend $350,000 on a sports car, I would want it to look like a $350,000 car! Not so with the 911—the $350,000 version
carries the same branding as the $90,000. Say what you will about Corvette handling, the brand is
I admit that I was surprised by several of the results—some
of which aren’t listed here. I’d encourage you to play around with the data for the 19 cars for which we pulled data. Our method here is not without its shortcomings. For one, this data is certainly subject to survivorship bias--that is, cars which did not reach a given age are not present here (though there value would be 0 and push averages down). In addition, we have made no account of mileage as a factor in depreciation.
Further, depreciation is only one consideration when purchasing a car, but it
is certainly among the most financially significant. It is interesting how time can
build up some things—like our investments—but destroy others. If nothing else,
I hope this helps you consider the loss of value from depreciation when you go to buy your
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