New cars lose value relative to their purchase price the minute you drive them off the lot. While the exact amount varies with the year, make, and model, Kelley Blue Book estimates vehicles will lose 20% or more of their value in the first year, and around 60% in the first five years.
There’s no way to completely avoid depreciation. In fact, it continues until the vehicle is essentially worthless, though the rate slows once you hit 100,000 miles. However, if you plan to resell your car within a few years or simply want to maximize what it’s worth, there are a few things you can do to minimize depreciation.
As a buyer: Choose a car with high resale value
Some cars hold their value better than others. Toyotas, for example, tend to depreciate far less rapidly than other makes. (Anecdotally, we’ve seen used Tacomas with 60K miles being sold for nearly the price of a new truck.) If you plan to resell your car long before you drive it into the ground, you may want to choose a make and model known for its high resale value.
Another option: buy used. Again, some vehicles hold their value, so you may not save much upfront depending on what you’re looking for. But if you buy a car that’s five years old or has a lot of miles on it, most of the depreciation has already occurred. Just make sure the vehicle was well cared for (see our next point).
As an owner: Maintain your vehicle, and don’t customize it too much
This one is pretty obvious. Take care of your car, and it’ll be more likely to be worth something when you sell it. This includes performing regularly scheduled maintenance and any necessary fixes, as well as keeping it clean. Keep records of everything you have done so you can prove you were a responsible owner. Finally, driving fewer-than-average miles per year may help your vehicle hold value relative to similar cars of the same model year.
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And while you might appreciate a tricked-out ride, customizing your car can make it harder to sell. This includes window tinting, adding lettering, and any other flashy aftermarket upgrades.
As a seller: Sell it yourself
Trading in or selling your vehicle to a dealer will cut into your profits. If you can handle the sale privately, you may be able to get closer to the true market value. The more you get in cash when selling your car, the less depreciation will cost you.
Bonus: Deduct depreciation on your taxes
If you use your vehicle for your business or side hustle, you may be able to deduct the depreciation on your tax return.
