What will a new car bought today be worth in three, four or five years?
No one knows for sure, as a few dings and scratches can make a big difference. But Kelley Blue Book offers free estimates, as well as an annual list of vehicles expected to hold their value best. The new list came out this week.
The idea is to help consumers choose new cars and trucks that will command good prices at turn-in or sale. But the data can be used another way — to support the case for buying a used vehicle instead of a new one.
The average vehicle loses 65% of its value after five years, according to Kelley. In fact, the biggest plunge, or largest depreciation, occurs in the first two or three years.
This is music to the ears of die-hard believers in used cars. Imagine that today’s vehicles can go 150,000 miles. At 10,000 miles a year, a five-year-old car would have two-thirds of its life left, but could be purchased for about one-third of its original cost.If the car cost $30,000 new and lost $20,000 in value over five years, depreciation would amount to 40 cents a mile, assuming 10,000 miles a year. But over the following 10 years, the car would travel 100,000 miles for $10,000. Depreciation would cost 10 cents a mile, a quarter as much.
Though maintenance costs would probably be higher in the later years, the used-car buyer could still come out way ahead.
Kelley notes that used-car values are partially influenced by factors such as consumer tastes, which have nothing to do with a vehicle’s life expectancy. Expensive vehicles do not necessary hold their value better than inexpensive ones.