when do cars depreciate most

[VanGraham]

The most significant depreciation hit occurs in the first three years of ownership, with the single steepest drop happening the moment you drive a new car off the dealership lot. Industry data consistently shows a new car can lose between 20% and 30% of its value within the first 12 months. This rapid decline then continues, albeit at a slightly slower pace, leading to an average total loss of about 50% of its original value after three years.

This "first-year cliff" is due to the vehicle immediately transitioning from "new" to "used." For buyers, this makes a nearly new, one-to-three-year-old used car one of the best financial decisions, as the original owner has already absorbed the heaviest depreciation.

Vehicle Type	Average Depreciation (1st Year)	Average Depreciation (3 Years)	Key Influencing Factors
Luxury Sedan	25-35%	50-60%	High initial cost, rapid technology updates, expensive maintenance.
Electric Vehicle (EV)	30-40%+	50-65%+	Evolving battery tech, government incentives, uncertain long-term battery life.
Mainstream Sedan	20-28%	45-55%	High supply, strong competition from SUVs.
Full-Size Truck/SUV	15-25%	35-45%	High demand, reputation for durability, strong resale market.
Hybrid Vehicle	18-26%	40-50%	Fuel price sensitivity, proven technology, reliable performance.

Beyond the initial years, depreciation typically slows to around 15% per year for years four through six, and then to about 10% annually after that. Factors that accelerate depreciation include high mileage, poor vehicle condition, an accident history, and outdated technology or styling. Choosing a model known for strong resale value, maintaining detailed service records, and keeping the mileage reasonable are the best ways to mitigate these financial losses.

[Stacey]

Think of it like this: the biggest drop is that very first day. You pay a premium for that "new car smell" and the thrill of being the first owner. The second you leave the dealer, it's just another used car. That initial hit is brutal. After that first year, the value keeps falling, but not as sharply. If you want to avoid the worst of it, buy a car that's already two or three years old. Let someone else take that initial financial bath.

[McParker]

From a purely financial standpoint, the most dramatic depreciation event is the instant of purchase. The manufacturer's suggested retail price (MSRP) includes the dealer's profit margin and the cost of moving the car from factory to showroom. Once the transaction is complete, those costs are sunk, and the vehicle's value recalibrates to the much larger and more competitive used car market. This immediate adjustment represents the single greatest percentage loss you will experience.

[Terry]

I always tell my friends to look at the three-year mark. That’s the sweet spot for buying used because the original owner has eaten the biggest loss. In the first 36 months, a car can lose half its value. It’s not just about age, though. A car with a bad reputation for reliability or one that's been in an accident will plummet even faster. My advice? Do your homework on which models hold their value best before you even start shopping.