Research: Which cars suffer from depreciation the most?

May 20, 2022
May 20, 2022

Research: Which cars suffer from depreciation the most?

by Karolis Bareckas

After you leave the dealership in your new car, it immediately loses a fair portion of its retail price. While the car’s value continues to degrade over time, some models depreciate faster. In light of this, we’ve decided to do some research to find out which car brands lose the most value.

Car depreciation and residual value explained

Car depreciation is the difference between the price you’ve paid for your car and its value when you sell it:

  • If you’ve bought a car for $100,000 and then sold it for $20,000 in 10 years, your car has depreciated by 80%
  • That would put its residual value at 20%.

While mileage and age are two factors that influence the vehicle’s price, different car brands lose value at different rates. In general, trucks, truck-based SUVs, and sports cars retain the most value. 

  • For this research, we’re mainly interested in the absolute residual value of a car brand – the point beyond which the car’s value no longer falls.

Residual value is an essential measurement when looking to lease a new vehicle. If two models cost the same but are expected to have a different residual value in a few years, your monthly payments will also differ. If you buy a car with good residual value, you will be able to sell it at a higher price compared to the models that depreciate faster.

To identify which car brands depreciate the most, we analyzed over 72 million data units between 2019 and 2022 in the US, Europe, and Australia. Let’s take a look at the key findings.

Top 5 car brands with the best residual value

Top 5 car brands with the best residual value

1. Porsche (-64.4%)

While Porsche manufactures sports cars, its models are practical enough for daily driving. The 911 is probably one of the most iconic cars in automotive history with a huge fan base. No wonder its demand outstrips supply. Porsche cars are reliable, durable, and have a distinguished look which attracts customers.

However, the latest Porsche models, such as the Cayenne and Panamera, typically have lower residual value than the 911. 

2. Jeep (-84.4%)

Jeep cars are known for their durability and high performance both on asphalt and dirt roads. While their maintenance costs may be above average, and they don’t offer good fuel economy, Jeep has loyal customers that ignore these things.

The Wrangler is one of the most popular Jeep models, whose classic design hasn’t changed much since its initial release in the ’80s. Jeep offers 10 different Wrangler versions, so even the pickiest drivers can find their favorite one. Powered by V6 and V8 engines, Wrangler is definitely a car that will help you survive even the harshest conditions. 

3. Mini (-85.5%)

Solid engineering solutions, stylish design, and a premium quality interior have made MINI a legend. MINI was first introduced in 1959, and at that time, it was the first small car to have front-wheel drive. Since the beginning of its history, MINI has offered vehicles with race-car qualities that are distinct in appearance and fun to drive.

MINIs were always popular among celebrities, and have made notable appearances in movies and TV series, raising the brand’s popularity and reputation even higher.

4. Land Rover (-86.3%)

Land Rover offers premium class SUVs that combine luxurious interior and technology solutions with off-road qualities. The Range Rover, Discovery, and Defender are aspirational cars with a hefty price tag. While many owners never use Land Rover’s four-wheel-drive capability to the fullest, in itself the car is a symbol of status and wealth. 

Even Queen Elizabeth has a Land Rover. As a matter of fact, some estimate that she’s owned around 30 Land Rovers during her reign, supporting one of the most famous British car manufacturers.

5. Jaguar (-86.7%)

Just like other cars on this list, Jaguars are classy, luxurious, and attractive. While Jaguars weren’t considered reliable for many years, the latest models prove the critics wrong. 

Jaguar became famous for manufacturing sports cars and luxury sedans but recently, it has stepped into the SUV and EV market to expand its lineup. 

Some of the earliest Jaguars (like the 1966 XJ13) cost millions of dollars, but you can find used models even for a couple of thousand. When you’re buying a Jaguar, you’re paying for the brand. Even second-hand Jaguars can be pricey, driving the brand’s overall residual value up.

Top 5 car brands that depreciate the most

Top 5 car brands that depreciate the most

1. Chrysler (-96.8%)

If you buy a new Chrysler, in 25 years, its value will drop to 3.2%, making it the most depreciating car brand on our list. Over the years, Chrysler has issued many recalls and received lots of complaints from customers.

The latest Chrysler models seem to have fewer problems but it may take a while for the customers to come back. It’s no wonder that Chrysler cars have a low residual value, and they’re not popular on the second-hand market.

2. Audi (-96.2%)

While Audi is one of the most respected German car brands, its cars depreciate quickly. Audi provides drivers with premium engineering solutions but their maintenance costs are higher than more traditional models. On the second-hand car market, customers are often looking to save money and are typically unwilling to pay for the luxury more expensive models can offer.

If you value an excellent driving experience and high quality, you should definitely go for Audi. However, buying a new one with a warranty is wiser than investing a lot of money into repairs from your own pocket.

3. Seat (-95.8%)

Seat shares many parts with Volkswagen, making it a reliable and valued brand. Additionally, Seat is more affordable and less expensive to fix, making it attractive for beginner drivers.

Despite all this, in the end, Seat cars reach a low residual value of 4.2% (at the age of 29). Why do Seats depreciate so much? If you compare Seat models like Ibiza with their direct competitors like Peugeot 208 or Citroen C4, you will notice that the Seats are a bit more conservative and less stylish. It’s a good choice for someone looking to save money, but it’s not a car that stands out on the street. 

4. Škoda (-95%)

Škoda is another brand on this list that belongs to Volkswagen Group. However, its models are cheaper and typically have lower residual value. While they’re not the most attractive cars on the market, Škoda has gained a reputation as a reliable family car.

As with Seat, Škoda’s low residual value has more to do with lack of excitement than quality. That said, while the value of Škodas drops significantly over the years, buying a used one is a real bargain.

5. Infiniti (-94.7%)

Infiniti is considered a premium car brand, but it’s not as prestigious as Mercedes-Benz or Lexus. The demand for used Infiniti models is low, resulting in fast depreciation. Car experts often argue that Infiniti hasn’t found its identity and often call it a “wannabe luxury brand”.

Used cars reach their lowest value at a different age

Used cars reach their lowest value at a different age

The average age when vehicles reach their lowest residual value is 20-23 years. However, this varies significantly from brand to brand. 

Porsche and MINI cost the least when they’re 15 years old. After they hit this mark, their value starts to grow again. Suzuki, Isuzu, Kia, and Dacia are on the opposite side of the spectrum — they reach rock bottom at the age of 30.

Why do used cars have a different value?

Let’s take Toyota and BMW as an example. Toyota cars reach their lowest value at the age of 19, whereas BMW – at 21. Toyota has a residual value of 11.3% (-88.7%), BMW – 6.2% (-93.8%). What factors cause these differences?

BMW and other luxury car brands typically have features and technological improvements that second-hand car buyers don’t value. If you can afford a new BMW, Mercedes-Benz, or Land Rover, you probably want all the luxury and innovations you can get. A person looking for a used car prioritizes price and maintenance costs over features.

Toyota has a much bigger consumer base than BMW, as it offers affordable and reliable cars. Over the years, Toyota has built a good reputation among drivers: its vehicles don’t break often, and their maintenance costs are relatively low. 

How to calculate car depreciation

While predicting the new car’s value in 3 years is relatively easy, things get more complicated when we pass the 10 year barrier. You can find a variety of car depreciation calculators online, however, take them with a grain of salt. 

Since car manufacturers typically have a vast choice of models, they all reach their lowest value at different speeds. This depends on a number of factors, including maintenance costs, engine, reliability, consumer satisfaction, and how many units of a particular model were produced in total.

Here’s a classic example. In the ’90s, BMW only made 891 units of M5 E39 Touring. 20 of them had a special name Elekta and were built for the Italian market. Powered by a 335 hp 3.8-liter engine, the Elektas also received a special paint job and interior style. Finding a used Elekta today is like searching for a needle in a haystack, and you should be ready to spend no less than $100,000 to park one in your garage.

If you’re looking for a used car, always check its history at https://www.carvertical.com/ first. All you need to do is type the vehicle’s VIN number to learn if the car’s mileage isn’t forged and view its accident and registration history. Sometimes sellers hide their car history, especially if the vehicle has suffered severe damage in the past. 

The bottom line

While most cars lose their value over the years, some models like Elekta grow in popularity and even cost more than on the day they’ve left the factory. If you buy a regular car, it will probably end up in a landfill in 20-30 years. However, a Porsche or Jaguar will last much longer and can even be a good investment in the long run.

FAQ

What is the depreciation rate of a car?

A car depreciation rate is a difference between the retail price of a vehicle and its value at the time of selling. If you’ve bought a car for $100,000 and sold it for $50,000 years later, the depreciation rate is 50%.

How much does a car depreciate per year?

Depending on your car brand, its value can depreciate by 20-30% by the end of the first year. In 5 years, most car models lose 60-70% of their initial value. The car depreciation rate over a longer period of time depends on its maintenance costs, customer satisfaction, reliability, and how many units of a particular model were produced.

How to calculate the car depreciation?

Subtract the car’s market value from its initial price to calculate its depreciation. You can also use a car depreciation calculator, which will show you how the price changes throughout the years.

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Article by

Karolis Bareckas

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