A new car loses roughly 24% of its value in the first year alone, then continues dropping about 11% to 14% each year after that. By the five-year mark, the average vehicle is worth about 44.7% of its original sticker price, meaning it has lost more than half its value. The exact rate depends heavily on the make, model, mileage, and condition of the car.
How Cars Lose Value Year by Year
The biggest hit comes the moment you drive off the lot. Bureau of Labor Statistics data covering 1996 through early 2022 shows the following annual depreciation pattern for new cars:
- Year 0 (first year of ownership): 23.9% loss
- Year 1 to 2: 11.3% loss
- Year 2 to 3: 10.8% loss
- Year 3 to 4: 14.0% loss
- Year 4 to 5: 13.7% loss
- Year 5 to 6: 13.1% loss
To put that in dollar terms: a $40,000 car would be worth roughly $30,440 after its first year. By year three, it would have dropped to around $23,700. By year five, you’d be looking at a value somewhere near $17,900. These are averages. Some vehicles hold value far better, and others fall off a cliff.
Which Cars Hold Value Best
Trucks, SUVs, and sports cars with strong brand loyalty tend to depreciate the slowest. Kelley Blue Book’s 2026 Best Resale Value Awards project the Toyota Tacoma to retain 63% of its original MSRP after five years, making it the top performer. The Toyota Tundra (59.9%), Toyota 4Runner (58%), and Mercedes-Benz G-Class (55%) also rank near the top. Other strong performers include the Ford Maverick (54.1%), Chevrolet Corvette (54%), and Porsche 911 (53.9%).
The pattern is clear: Toyota dominates the list, holding six of the top ten spots. Vehicles with limited supply, cult followings, or strong off-road reputations tend to resist depreciation more than sedans or economy cars. The top ten vehicles average 56.2% retained value at five years, compared to the overall market average of 44.7%.
Electric Cars Depreciate Faster
If you’re considering an EV, be aware that electric vehicles lose value significantly faster than the market average. The average five-year-old EV has lost 57.2% of its value, compared to 41.8% for all vehicles. That’s a meaningful gap. A $50,000 EV would be worth about $21,400 after five years, while a $50,000 gas vehicle would retain roughly $29,100.
Hybrids, interestingly, hold their value the best of any powertrain type, losing only 35.4% over five years. This likely reflects strong demand for fuel efficiency combined with fewer concerns about battery range or charging infrastructure. If resale value matters to you, hybrids currently offer the best retention.
What Affects Your Specific Car’s Depreciation
The average depreciation curve is just a starting point. Several factors push your car’s value higher or lower than the norm.
Mileage is one of the biggest drivers. The typical American puts about 12,000 to 15,000 miles per year on a car. If you’re well above that pace, your car will lose value faster. However, once the odometer crosses 100,000 miles, the rate of depreciation tends to slow. At that point, buyers already expect high mileage, so each additional mile has less impact on price.
Condition and maintenance history can make a surprising difference. A ten-year-old car with 100,000 miles that has been carefully maintained can be worth more than a five-year-old car with 50,000 miles that was neglected. Keeping records of oil changes, tire rotations, and other routine service demonstrates responsible ownership and directly supports your car’s resale price.
Accident history permanently reduces a vehicle’s value. Even after repairs are completed, a car with an accident on its record will sell for less than an identical car with a clean history. Insurance companies and buyers both check vehicle history reports, so there’s no hiding it.
Make and model matter more than almost anything else. Two cars bought at the same price on the same day can have wildly different values five years later. A Toyota Tacoma retaining 63% of its value and a comparable sedan retaining 40% represents thousands of dollars in difference. If you’re buying new and plan to sell or trade in within a few years, choosing a model with strong resale value is one of the best financial moves you can make.
Slowing Depreciation on Your Car
You can’t stop depreciation, but you can slow it. Keeping your annual mileage reasonable, staying on top of maintenance, and keeping the interior and exterior in good shape all help. Choosing popular colors (white, black, gray, and silver tend to resell better than unusual colors) and opting for trim levels with desirable features also support higher resale values.
Buying a car that’s one to three years old is another strategy. Since the steepest drop happens in year one, letting someone else absorb that initial 24% loss means you start on the flatter part of the depreciation curve. You still lose value each year, but the dollar amounts are smaller because your starting price was lower.
Business Vehicle Depreciation for Taxes
If you use a car for business, the IRS allows you to deduct depreciation as a business expense, but passenger vehicles have annual caps. For cars placed in service in 2026, the limits depend on whether you claim bonus depreciation (an accelerated first-year write-off).
With bonus depreciation applied, the caps are:
- Year 1: $20,300
- Year 2: $19,800
- Year 3: $11,900
- Each year after: $7,160
Without bonus depreciation, the first-year limit drops to $12,300, while years two through four remain the same. To qualify for bonus depreciation at all, you must use the vehicle more than 50% for business purposes. For 2026, the bonus depreciation rate has phased down to 20% for vehicles acquired before January 20, 2025, and placed in service during the year.
These caps apply to passenger cars, which the IRS defines as most sedans, coupes, and smaller SUVs. Larger vehicles over 6,000 pounds gross vehicle weight, like full-size SUVs and pickup trucks, can qualify for higher deductions, including the full Section 179 deduction, which is why you often hear about business owners buying heavy SUVs for the tax benefit.
Tax depreciation and market depreciation are completely separate concepts. The IRS schedule doesn’t reflect what your car is actually worth on the used market. It’s purely a tool for spreading the cost of a business asset across multiple tax years.