AAA Study: Depreciation Costs Rising Among Smaller Vehicles; Your Beautiful Truck Has It Made

Steph Willems
by Steph Willems
aaa study depreciation costs rising among smaller vehicles your beautiful truck has

Not to hammer too obvious a point here, but the decreasing popularity of a certain car model, combined with increasing incentivization, can seriously influence that model’s depreciation. Ask Cadillac about that. While a boon for savvy used car buyers a few years down the road, it doesn’t help anyone’s lease payment and can leave you upside down on a long-term loan.

In its annual Your Driving Costs study, the American Automobile Association broke down the average vehicle, fuel, insurance, maintenance, loan interest, and depreciation costs of various vehicle segments to show what a hypothetical new car buyer can expect to pay, annually, over the course of a five-year loan.

Naturally, your overall bill’s going to be lower with a smaller, cheaper, thriftier vehicle. That said, after looking at the findings of last year’s study, cars in certain segments are shedding their value at a growing clip. And you’ll pay for that.

Everything’s up compared to 2018 — insurance premiums, pump prices, MSRPs — which shouldn’t come as a shock to anyone. In the U.S., the average annual cost of owning a small car (defined as a Chevrolet Cruze, Ford Focus, Hyundai Elantra, Honda Civic, and Toyota Corolla) with an automatic transmission, A/C, and a modicum of other creature comforts, is $6,777, up from $6,354 last year.

AAA’s study assumes you’re a fully-insured driver, below the age of 65, who lives in a suburban or urban area and has at least six years of driving experience and a clean record. You’ve bought the mid-tier model for the average price of the group, paying an average interest rate on the 60-month loan (derived from five top lenders, weighted by market share). Fees and taxes are also averaged, and your odometer clicks over exactly 15,000 miles each of the five years. You insurance?

Compared to 2017, the 2018 study sees annual small car depreciation costs rise from $2,114 to $2,268. That’s a 7.3 percent increase in depreciation costs versus an overall cost of ownership increase of 6.7 percent.

A medium sedan — in this case, a Malibu/Fusion/Altima/Accord/Camry — will set you back, on average, $8,866 a year, up from $8,171 last year, but its depreciation cost is significantly higher than 2017. A mid-sized sedan can expect to lose $3,580 in value each year, compared to $3,187 in last year’s study. That’s a 12.3 percent increase, compared to the car’s overall cost increase of 8.5 percent.

We can be assured of cheap, pre-owned midsizers for years to come.

Large cars (Impala/Taurus/Maxima/300/Avalon) don’t see quite as large a depreciation jump, with those costs going from $3,799 to $3,893. The annual overall cost of ownership for this group is $9,804, up from $9,399.

In the small SUV segment, defined as the Chevrolet Equinox, Ford Escape, Honda CR-V, Nissan Rogue, and Toyota RAV4, average annual ownership costs are also up by a predictable amount ($7,869, from $7,606), while depreciation costs climb slightly from $2,840 to $2,927. The depreciation increase disappears altogether when you get into the midsize SUV category (Traverse/Pilot/Explorer/Grand Cherokee/Highlander). In this popular segment, annual depreciation costs dropped $6 a year, despite the overall cost of ownership ($9,697) rising by 2.6 percent. Good resale values in this club.

Sadly for minivan lovers, depreciation is on the rise (4.3 percent) in this once healthy, now semi-populated segment, though it’s tempered by a significant bump in overall operating costs ($9,146 to $9,677). Much like the midsize SUV segment, full-size trucks (in this case, a crew cab 4×4 averaged from the only choices on the market) hold their value like a Rembrandt. Even more so, in fact.

Depreciation fell by $69 a year in this segment for 2018 (to $3,518), even as the cost of owning such a truck rose slightly from $10,054 to $10,215. Just because you’re sitting pretty at trade-in time doesn’t mean gas and insurance costs can’t hurt you.

Another takeaway from the study is how the improving perception of electric vehicles, no doubt helped by a slew of new or updated models with greater range, has moved their rate of depreciation in a healthier direction. Annual depreciation cost for the list of non-Tesla EVs (Bolt/Focus/Leaf/i3/Soul) improved to $5,481 this year, down from $5,704. Hybrid cars (Fusion, Ioniq/Niro/RAV4/Prius) see a lesser positive change, with depreciation sinking to $3,068 from last year’s $3,301. Note: this year’s list of hybrids adds two new vehicles (Ioniq and Niro) and omits last year’s Accord and Sonata entries, so all is not the same in Averageland.

The public’s buying preferences scream loud and clear from this study, though it’s not as if we weren’t already amply aware of where the average buyers’ tastes lie. One wonders what the depreciation cost of compact and midsize sedans would be if AAA omitted all automakers except Ford.

[Image: General Motors, Toyota]

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  • APaGttH APaGttH on Sep 18, 2018

    Just bought a lightly used 2017 Buick LaCrosse AWD Premium with every option boxed checked off - even the chrome upgrade for the vents and the $995 pearl white paint. (didn't want the color, don't care about chrome vents, but when you opt to buy used). According to the Buick website, the sticker price was $51.3K - which is insane for the car. That's entry-level A6 money in 2017. I paid $27.3K, which is now a perceived bargain. Have original warranty coverage until 2021, got free Sirius XM for 3 months and then another 6 months for $30, and even had one dealer service remaining in the 2/24 period (which I already used up). Bought from an Audi dealer that took it in trade through USAA. Depreciation can be a very good thing and someone else took a 50% kick to the scrot for one year of ownership.

  • TomLU86 TomLU86 on Sep 21, 2018

    One really does not know if they are "in the black", until they actually sell it. My experience has been that the older, cheaper cars in excellent condition that I have sold have sold for close to the "trade-in" values listed online, or by Kelly Blue Book, or the NADA price guide. More expensive, newer cars are harder to sell. ACTUAL trade-in values are ridiculously low. So I use the KBB and NADA as relative guides, much like the old EPA fuel economy estimate. You don't know how much your car is worth until you actually sell and get paid.

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