Car buyers are usually aware that their new vehicle will start losing value as soon as it’s driven off the dealership’s lot.
These days, depending on the car, depreciation may be a lot less than it was in past years, according to a new study from iSeeCars.com. With supply-chain issues that have squeezed inventory at dealers — a situation that’s slowly improving — and persisting consumer demand, some cars have been holding their value especially well.
In 2022, the average 5-year-old car has depreciated by 33.3%, the analysis shows. Last year, that rate was 40%.
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Sports cars, Jeep models among slowest to depreciate
The top three cars that have held the most value over the last five years are the Jeep Wrangler, which showed the least depreciation (7%), followed by the Jeep Wrangler Unlimited (8.7%) and the Porsche 911 (14.6%), according to the iSeeCars analysis.
“The relative scarcity of late-model used cars due to pandemic-related new car production disruptions has kept used car values high for more than a year,” said Karl Brauer, executive analyst for iSeeCars.
The report also showed that some 3-year-old cars have held their values to the point that they sell for above their sticker price. That short list is topped by the Porsche 911, which has appreciated by 5.7% and the Toyota RAV4 Hybrid, with a 2.5% increase in value over the last three years.
While used-car prices are beginning to ease, they remain 2% higher than a year ago, according to the latest inflation reading from the U.S. Bureau of Labor Statistics.
Average new car price is up 8.4% from a year ago
The cost of new cars also has been climbing through the pandemic-induced inventory shortages.
While increases are easing, new vehicle prices are 8.4% higher than they were a year ago, according to the inflation data. The average price in October was roughly $45,600, a recent joint estimate from J.D. Power and LMC Automotive shows.
If you are shopping for a new car, your used car — as a trade-in — is your biggest bargaining chip to reduce how big of a loan you need to take out for the purchase, experts say.
With interest rates continuing to tick up, it’s worth reducing the amount you’d need to finance as much as possible. Average monthly payments on auto loans are an estimated $711, up $47 from a year ago, according to the J.D. Power/LMC forecast.
“The increase in monthly loan payments would be even greater were it not for the continued strength of used-vehicle prices, which increases the amount of trade-in equity,” said Thomas King, president of the data and analytics division at J.D. Power.