What Is Car Depreciation?

How Does Car Depreciation Work?

Unlike many homes and collectible cars, new and used vehicles generally lose value over time. This doesn't mean a less valuable car is a lemon, though. Rather, depreciation is driven by factors such as:

• Age: The older a car gets, the more value it loses. That's true even if the car looks great and runs well.
• Mileage: The more miles you put on a car's odometer, the more wear and tear the car has seen—and the more the value typically goes down.
• Condition: If the rear bumper is dented, the hood is scratched, the air conditioning doesn't work right or the upholstery is torn, for instance, the car's value might go down.
• Vehicle history: If the vehicle history report for your car indicates it was repaired after a major accident, the value could drop. Lacking proof that your car wasn't properly maintained might also lead to a decrease in value.
• Car brand: Some car brands earn high marks for reliability, while others have a bad reputation. Reliable cars tend to maintain their value more than unreliable cars do.
• Market demand: Popular or fuel-efficient cars might hold their value more than other models.
• Features: Features such as GPS systems, sunroofs and heated seats can bump up a car's value, while a car may be considered less valuable without these and other desirable features.
• Color: The color of your car can affect its value. For example, a neutral-color white or black car might hold more value than a less-common green or purple car.

Learn more: How to Buy a Used Car

How Quickly Do Cars Depreciate?

In the first month alone, a new car typically loses more than 10% of its value, Carfax data shows. And in the first year of ownership, the value decreases by about 20%. Five years after being purchased, the average new car will be worth 40% of its sale price, according to Carfax.

Estimates from Kelley Blue Book show an even greater five-year loss of value for a new car: up to 60%. In the iSeeCars analysis, five-year depreciation rates ranged from a high of 63.1% to a low of 9.6%.

Example: Let's say you paid $50,000 for a new car. Based on Carfax estimates, your car's value would fall by at least $5,000 in the first month, about $10,000 in the first year and about $20,000 at the five-year mark. So, within five years, the value of the car would be about $30,000.

Source: iSeeCars analysis of over 950,000 5-year-old used cars sold March 2025-February 2026
^*Manufacturer's suggested retail price

Learn more: How Much Do Cars Depreciate per Year?

How Does Car Depreciation Affect You?

Car depreciation can affect you in several ways—all of which are tied to money.

• Auto loan: If you took out an auto loan to finance your car, then you drove it for a few years and sold it at market value, you could end up being "upside down" on the loan. This means you'd owe more money on the loan than the car's worth due to depreciation, forcing you to cover the difference between the loan balance and proceeds from the car sale.
• Market value: Let's say you've driven your car for five years and want to sell it to another person or a used car dealer. Depreciation can reduce the amount of money you could reap from the deal.
• Trade-in value: Depreciation of your car might drag down its trade-in value when you decide to buy a different car from a dealership.
• Insurance claim: If your car is stolen or totaled, a typical auto insurance policy will cover only the car's current market value. So, if you have a car loan or lease, a claim paying only the current market value might not be enough to cover the loan or lease balance.

How Can You Reduce Your Car's Depreciation?

Just as you may be able to reduce the effects of aging, you can take several steps to reduce your car's depreciation:

• Commit to maintenance. If you take good care of your car—regular oil changes, tire rotations and other maintenance—it might not depreciate as quickly.
• Preserve the appearance. By fixing exterior damage, properly caring for the interior and regularly washing and waxing your car, you stand a better chance of lowering the depreciation rate. In addition, parking your car in a home garage can prevent sun and weather damage.
• Avoid racking up too many miles. Adding lots of mileage can contribute to wear and tear and lower the market value of your car.
• Buy a dependable car. Picking a reliable car with a solid market value can improve the chances of your car running smoothly and slow the depreciation rate.

Learn more: How to Protect Your Car's Value

Looking Under the Hood of Car Depreciation

Car depreciation is the decline in a vehicle's value due to factors like age, mileage, condition and market demand, with some cars losing more than 60% of their value in just five years. This loss in value can affect a car's resale or trade-in value, and even leave a borrower "upside down" on an auto loan.

To help manage the financial side of car ownership, Experian offers a free credit monitoring service that lets you track your FICO^® Score^Θ and Experian credit report. This information can be useful when you're taking out or refinancing an auto loan.