It’s no secret that cars can depreciate by orders of magnitude, or nearly 20% just for rolling off the lot. In five years, a brand new car on average depreciates to about 37% of its original value, as explained in this article on edmunds.com. Some brands evade this epidemic, like Toyota and Porsche, which have just earned the best resale values according to KBB, but others are doomed to suffer plummeting resale values.
Unfortunately there are no awards given for the brands with the most dramatic depreciation rates, nor for the cars with the worst resale value. However, NADA does provide some interesting information, and that with pulling from a list of the most worthless cars of 2014 gives us some interesting results.
Let’s take a look at four different vehicles from this list, two from luxury brands and two from standard brands to see how much each car is worth today compared to the MSRP.
First off from non-luxury brands, we have the inline-four equipped 2014 Dodge Avenger, which retailed at $20,595 and is now only worth $8,750. That’s about 58-percent less than its original worth. Another car suffering from steep depreciation is the 2014 Kia Sedona, which depreciated 55-percent from $25,900 to $11,650.
The V6 equipped 2014 Lincoln MKS rolled off the dealership lot at a reasonable $38,850. In four years, NADA has concluded its trade-in worth at a dismal $17,150, which is a depreciation of around 56-percent. The worst depreciation of all the cars we looked at from 2014 is undoubtedly the 2014 V6 equipped Jaguar XJ, which retailed for $74,200 and is now worth a trade-in value of $29,925, which is a depreciation of around 60-percent.
A few more examples of the worst resale value cars are the Chevrolet Captiva Sport with a depreciation of 62-percent, the Chevrolet Impala Limited with 60-percent, the Ram Cargo Van also with 60-percent, The Nissan Titan with 59-percent and the Mercedes CL-Class and Volkswagen Toureg, both with a depreciation of 58-percent. All of the cars were from 2014, and their depreciation was calculated over a period of three years.
So what happens to these cars in the short span of a few years? For cars like the Kia Sedona and Dodge Avenger, it could be as simple as the fact that some of these cars are discontinued, or it could be that the complete cost of ownership ends up being more than what the car was bought for originally. The 2014 Kia Sedona, for instance starting with its original price tag of $24,900 ends up costing more than $40,000, according to Edmund's true cost to own calculation. The 2014 Toyota Tacoma, for instance, as one of the cars that’s known to hold its value well only ends up costing a little more than $32,000 from its original price tag of near $27,000.
For high-end luxury cars, a theory is that they can depreciate quickly because people who can afford one don’t want to be the second owner, or by default third or fourth etc. Since it’s a used vehicle, the new owner doesn’t know what kind of history the car has in terms of maintenance and how it’s been driven. Luxury cars already need a lot of attention, require a lot of money and push a lot of technology, which makes them complicated and in turn more costly in the long run. In other words, the demand for used luxury cars isn’t as prominent as it is for other more practical cars. Of course there are exceptions like Porsche and Lexus, but Lexus is part of Toyota and Porsche cars have a reputation for holding value.
As a seller, there is no real way around this, but there are tips you can follow to slow down the depreciation. Keeping the car in good condition and holding on to maintenance records are always good practices, as well as keeping the list price realistic in the event you want to sell.
As a buyer there is a strategy to using depreciation in your favor. In this article from Edmunds you can see a car loses about $7,000 in its first year, but in the four subsequent years only loses around $5,000, which means purchasing a car is best done in its second year. The reason is that the next four years after its release the car doesn’t lose as much value as it did the first year. So, using depreciation in this way as the buyer means saving a lot of money.
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