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6 hacks to minimize car depreciation

Worried that your car is worth less before you even drive it off the lot? Learn more about how car depreciation works.

According to estimates by CarFax, a new car’s value decreases by more than 10 percent as soon as it’s driven off the dealership lot — and will drop a total of 60 percent in the first five years. Minimize the financial pain with these six car depreciation management tips.

  1. Maintain your car
    Chances are, you’ll get better resale value if you’re able to keep your vehicle in good shape — inside and out — and drive a typical or less-than-average number of miles per year. Also, follow the recommended maintenance schedule for your vehicle and keep records of the work. Avoid modifications — such as window lettering — that may make a car more difficult to sell.
  2. Buy a high-resale model
    Some cars hold their value better than others. For example, one study showed that midsize sedans lost 5.5 more percentage points in value than compact crossovers in 2017. By researching resale values before you buy, you can avoid vehicles that get hit hardest by car depreciation.
  3. Consider a used car
    The new car depreciation rate is fastest in the first three years — effectively meaning that vehicles may lose more than 40 percent of value in that time span. Translation: If you buy a three-year-old car, someone else has effectively “paid” the bulk of the depreciation for you.
  4. Drive your car a really long time
    There’s an old saying that the stock market is like a roller coaster: You only get hurt if you jump off. The same is true of car depreciation. Since depreciation only hits you when you sell, you’ll feel the effect less if you keep driving the same car for years after it has lost most of its initial value. Once you’ve decided to purchase a different vehicle, you can plan the best time to buy, too.
  5. Review possible tax write-offs
    If you use your car for a business (even a side business), you may be able to deduct a portion of your car’s depreciation on your income taxes over five years. Consult your tax advisor for details.
  6. Sell it yourself
    Ultimately, depreciation is a simple math problem: [purchase price] – [sale price] = [depreciation]. The more you get for your car when you sell it, the less you lose in depreciation. In general, you may get more through a private sale than a trade-in.

State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates) is not responsible for, and does not endorse or approve, either implicitly or explicitly, any third party products or the content of any third party sites referenced in this material. State Farm has no discretion to alter, update, or control the content on the third party sites. Any references to such sites are provided for informational purposes only and are not a solicitation to buy or sell any of the products which may be referenced on such third party sites. State Farm does not warrant the merchantability, fitness, or quality of the third party products referenced in this material.

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