Vehicle depreciation patterns by type
Key takeaways
04 · ideas- New vehicles typically lose 15-25% of value in the first year
- Luxury vehicles often depreciate faster in percentage terms
- Trucks and off-road SUVs have historically held value well
- Discontinued models tend to depreciate faster
Basic level
The essentials · 1 min
Depreciation is the difference between what you paid for a vehicle and what it is worth when you sell or trade it. For most consumers, it is one of the largest single costs of vehicle ownership.
General pattern by type (approximate 3-year value retention):
| Vehicle type | Typical 3-year retention |
|---|---|
| Full-size pickup trucks | 60-70% |
| Off-road SUVs | 65-75% |
| Mainstream crossovers | 50-60% |
| Mainstream sedans | 45-55% |
| Luxury sedans | 35-50% |
| Electric vehicles | 40-60% (high variance) |
These are general ranges; individual models vary significantly within each category.
Intermediate level
How it applies · 1 min
Why luxury vehicles often depreciate faster
Luxury vehicles are more expensive to maintain as they age (specialty parts, higher labor rates), which reduces demand in the used market. Additionally, the audience for luxury features tends to prefer buying new for the latest technology, further reducing used demand.
EV depreciation variance: Electric vehicles have shown high variance. When newer EVs offer significantly more range at similar prices, older models can lose value more quickly. Government incentives also affect used EV pricing.
Discontinued models
When a manufacturer discontinues a nameplate, the used market typically sees faster depreciation because there are no new versions creating ongoing demand, and long-term parts availability may be uncertain. Models with large installed bases and strong secondary market communities often show slower depreciation.
Advanced level
The math, step by step · 1 min
Residual value in lease pricing
Residual value — the projected future value of a vehicle — is central to lease pricing. When manufacturers set a high residual (forecasting strong value retention), monthly lease payments are lower because the lessee finances less of the depreciation. Manufacturers sometimes subsidize residuals to make lease payments appear more attractive, effectively absorbing future depreciation risk.