By on September 14, 2018

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.

2017 Toyota Highlander Hybrid Platinum - Image: Toyota

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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31 Comments on “AAA Study: Depreciation Costs Rising Among Smaller Vehicles; Your Beautiful Truck Has It Made...”


  • avatar

    Watching the new used market not a big surprise. CUVS and SUVS, as well as trucks seem to be doing really well even the older ones. Compact cars are getting pretty cheap even the popular ones like Corolla and Civic.

  • avatar
    SCE to AUX

    Depreciation and calculated annual costs of ownership are so depressing.

  • avatar
    Garrett

    This is why I only purchase highly collectible supercars that will experience massive levels of appreciation within a matter of years.

    Just kidding. I hate to imagine how much money I’ve squandered over the years when it comes to vehicles.

  • avatar
    mtunofun1

    This is why I put down the estimated depreciation cost for the duration of my loan when buying a new car. So if it totals, i know I’ll get equity back. Although my next car will be paid for in cash .

  • avatar
    forward_look

    Moral of the story, get a used one and keep it til it dies, because depreciation doesn’t matter when you take it to the junkyard. My modus operandi.

    Actually, I usually sell them when they’re still useable, and a thrifty ride is easier to sell than a guzzler.

  • avatar
    dusterdude

    If you want a compact car that isnt too old , one idea is to look at ” lease takeovers” that are approx a couple years old , as lease payment should be more favourable, given that residual values were likely more favourable then .. ( and current lease holders may also be willing to offer an incentive to exit lease ) ..

    • 0 avatar
      forward_look

      Car dealers hereabouts always overprice them. The last 2 cars we’ve gotten have been rentals, 1-1/2 years old with 25K miles and half price of new.

      If I wanted a manual trans with a trailer hitch and highest/lowest trim that would be different.

  • avatar
    whynotaztec

    I spent the last few months looking for a used truck, those things are getting to be like wranglers when it comes to holding value. 7 years old with 100k miles still at 20 grand. Mercedes is almost worthless at that point.

  • avatar
    sportyaccordy

    Would be nice to know these numbers as percentage of purchase price (not MSRP). Obviously a large car will cost more than a small one. But a large car can depreciate more in $ and still retain more of its value.

  • avatar
    Leonard Ostrander

    Beautiful Truck???

  • avatar
    DeadWeight

    A 18-24 month old Cadillac XTS that had a $52,000 MSRP which although not a great car (Guangzhou-Guadalajara Motors makes no great vehicles, and at most, 3 decent ones), can be had for $25,000 with 16,000-20,000 miles on the odometer.

    It rides better and more quietly than any other Cadillac (Cradirack), including the ridiculously awful and insanely overpriced POS CT6 that has a laughable $60,000 to $88,000 MSRP.

    Now that China’s domestic vehicle sales market is imploding, the hurt will come down on Guangzhou-Guadalajara Motors (GM) like a sledgehammer, particularly Bruick and Crapillac.

    • 0 avatar
      Dave M.

      Deadweight – enough with the cutesy names. It’s juvenile and racist. We get it, you don’t like GM. Either add to the conversation or refrain from commenting.

      • 0 avatar
        DeadWeight

        Hey bro, if you don’t like my (well warranted) nickname for GM, there’s a simple solution for your trigger events: Don’t read my comments, or read them after getting some tough skin.

        If this nickname bothers you, do not past go, and head immediately for your nearest safe space, then proceed to shelter in place.

        I will use whatever (well warranted) alternative name, especially Guangzhou-Guadalajara Motors (GGM) – the “American” company that now produces more vehicles in China, Korea, and Mexico, using then highest percentage of foreign made (typically Chinese, Mexican, etc.), for GM, as much as I want, whenever I want, and as emphatically as I want.

        DEAL WITH IT.

        • 0 avatar
          Dave M.

          Your nickname doesn’t bother me at all. You dislike of GM doesn’t bother me at all – we probably share a similar opinion on them. Race slanted comments bother me.

          • 0 avatar
            DeadWeight

            Absolutely nothing racial, racist, bigoted, etc., about what I said.

            I have never played those words here or elsewhere.

            I do not dislike citizens of China, Mexico, either Korea (feel sorry for North Korean people), or any other nation – just the opposite; I have problems with many of their governments.

            I am free to detest the Chinese Government and other governments for specific reasons, speak openly about it, especially as they e engage in absolutely unfair trade policy with the U.S. thanks in no small part to literal corrupt and inept and short-term acting and seditious corporations such as Guangzhou-Guadalajara-Gangwon Motors.

  • avatar
    watersketch

    I wonder how much of the high depreciation for EVs is related to the tax credits, and whether depreciation will go to normal when the tax credits end.

  • avatar
    Superdessucke

    Has anyone ever noticed that this site rarely tests any new cars other than rented SUVs and CUVs? They just continue to push the same agenda over and over again. And then again and again in case we missed it the 9th time.

    Maybe they should focus on actually driving and reporting on cars instead, and let the market decide what it’s going to buy. That would be nice.

    • 0 avatar
      JohnTaurus

      You may be on to something! 5 (FIVE!!!) out of the last 15 reviews are utility vehicles! Five! That’s unacceptable. They should only review the vehicles we approve in advance.

      https://www.thetruthaboutcars.com/category/reviews/

      Just because news like this isn’t what you want to hear doesn’t make it an “agenda” or untrue. They report the facts, and the facts are that the market is skewing away from traditional sedans. You think this is TTAC’s fault? Do they have that much influence? Wow.

      FIVE OUT OF FIFTEENTH! What an agenda.

  • avatar
    Davekaybsc

    The time has never been better to be a late model used “preimum”/lux sedan buyer. The guy (or lady) who bought my MKZ in 2014 paid $52K for it. Maybe a bit less out the door, but that was MSRP. I got it two years later for $24K.

    KBB says it’s worth about $17K now. So the first owner lost, depending on what they actually paid, over $10K/year in depreciation. I’m losing maybe $4K/year.

  • avatar
    SD 328I

    My F150 is the first vehicle I’ve owned that I was in the black within 2 years of ownership.

    Pretty happy to know I owe less than what it’s worth in such a short time, especially compared to the German sedans I’ve owned, which were always on the other end of the spectrum.

    • 0 avatar
      stuki

      You know vehicles have long since reached maturity, when someone spoiled by the driving experience of the finest the Germans can cook up, are then satisfied with the driving experience of a BOF, live axle, leaf sprung truck..

    • 0 avatar
      el scotto

      SD 3281, in your defense; at one point in my life I had an F-150 for work and a BMW 325 for the weekend. Most people have figured out that their F-150/Silverado/Ram will pretty much be hassle free for 150,000 miles. A BMW 325/A4/C Klasse will need some very expensive part replaced if you sneeze in it three times. For most of us, your POSSLQ/partner doesn’t really car what you drive as long as it’s not in the “not embarrassing” category. With leather and sunroofs, many are going back/making a truck their primary vehicle.

      • 0 avatar

        It’s more than that. A water pump / starter / alternator can be had for a small block chevy / ford V8 for under $100. An electric coolant pump for a BMW/MB/Audi can run you $700 or more. And there’s no way you can replace it yourself. Can’t even do the brakes without the BMW scan tool to retract the electric parking brake.

        My GF has a (then) $60,000 BMW, twin-turbo, AWD X335i. 2011 model. Today, literally, we’re hoping to receive $9000 trade-in on it. A complete brake job, at a BMW specialty shop just ran $1700. Turbos can reasonably be expected to last to 125k, 150K? Of course the warranty ran out at 60,000 miles so these are all out of pocket expenses. A tail light “module” was over $500 to replace.

        It’s a mind blowingly great car, but you gotta have money to burn to drive one of these, new OR used. Whereas an older Chevy or Ford truck, bought as a 2-year old, will pretty much hold 80% of it’s value even out to 300K miles. I’ve got a total investment in my ’97 Chevy K1500 of around $12,000 over 10 years. I get offers to purchase it every time I take it out.

        Conclusion: A 10 or even 20 year old American truck with a V8 offers the lowest cost of ownership both in depreciation and repairs. EcoBoost? ha,ha, don’t make me laugh.

  • avatar
    APaGttH

    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.

  • avatar
    tomLU86

    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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