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New vs. Used Car Depreciation: Things to Know Before Buying

Sometimes, splurging on a new model might bring a bigger return

New cars at dealer showroom

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En español | A lot of sage advice says you're better off buying a used car than a new one.

Is a new car ever a good idea, especially now when the pandemic has hampered factory production and new car inventories are down, meaning prices are up? If you're in a position to be car shopping, then, yes, consider certain new cars instead of their used counterparts, says iSeeCars.com, which tracks car statistics — prices, accumulated miles and so forth — with its multimillion-vehicle database.

Some new models depreciate so little their first year that you might as well buy new to get the full warranty. Plus rebates and zero percent or super-low-interest loans are sometimes available on new cars but not on used.


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Yet some one-year-old luxury vehicles, especially some BMWs, are far better buys used because they lost so much in value their first year, the data firm says. iSeeCars, which has its headquarters in the Boston suburb of Woburn, uses the term “lightly used,” meaning roughly 13,000 miles.

It compares and contrasts data on tens of millions of vehicles, such as this new vs. used evaluation. This data was analyzed in March before the coronavirus pandemic had caused shortages of both new and used cars, pushing up their prices. While a specific average price might have changed in the meantime, the percentages between new and used prices — the depreciation — is likely to be about the same, iSeeCars officials say.

Some luxe cars don't hold value

The jaw-dropper is the BMW 7 Series, according to iSeeCars data. Remember, the data is an average and doesn't refer to any specific version of the 7 Series.

The company's data analysis includes 2018 and some 2019 models all sold used. It shows an average new price for the 7 Series is $109,231. Average price after a year: $61,784.

The big, luxurious 7 Series is chock-a-block full of features and power, and the base price for the least expensive model new is about $87,000. So it's a lot of car for about $62,000, even at a year old.


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"Super luxury cars like the BMW 7 Series take large depreciation hits due to their high starting prices, which is coupled with the car [7 Series] being redesigned in 2020 to automatically date 2019 models,” iSeeCars Chief Executive Phong Ly says.

Put simply, “You'll be able to get a cooler car for less money,” Motor Trend commented a year ago in an article on luxury car depreciation.

In addition to the 7 Series, BMWs on the buy-used list are the 3 Series; 4 Series; and the X6, a crossover SUV with a hatchback-sedan body. Five others on the list also are luxury makes. The only exception is a Chevrolet Camaro.


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A big drop in value the first year is a negative to new-car buyers. But it's a plus to used-car bargain hunters.

A year-old car, which is what we're discussing here, will have some or most of the automaker's original warranty, usually 3 years or 36,000 miles though exceptions do exist. And a yearling still could have some of the free maintenance that some manufacturers offer.

BMW cut its free maintenance to three years, from four, on 2017 and newer model vehicles and reduced the number of items covered. Keep in mind that most 2020 models are still considered new in this study though many now are being replaced in showrooms with 2021 models.

Some models are better deals new

When a vehicle loses little value in its first year, a new one is a good bet. Sometimes a car holds its value if it was recently redesigned or had other changes that could slow depreciation.

Four Hondas are on iSeeCars’ buy-new list, and most of the others are likewise mainstream models. Two big exceptions: Tesla's Model 3 luxury electric sedan drops a scant 5.5 percent its first year, putting it atop the buy-new list. The Chevrolet Corvette is No. 7, dropping 13.6 percent the first year.

The Ford Ranger mid-size pickup, reintroduced to the U.S. as a 2019 model, is No. 2. iSeeCars was able to tease out enough Ranger details for AARP so we can use it as an example to show how averages can camouflage extremes.

The top-end Ranger Lariat drops 19.4 percent to $33,125 its first year. The XL, the base version, drops 7.4 percent to $29,795.

Why? Lariat is loaded with leather upholstery, heated seats and a heated steering wheel, a luxury stereo and other features alluring to new vehicle buyers but less exciting in the used-vehicle market, according to iSeeCars. The numbers here are averages of some 6 million transactions that iSeeCars tracked.

Used-car bargains

A BMW 7 Series

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1. BMW 7 Series. Average new price, $109,231. One-year depreciation, 43.4 percent. Average year-old price, $61,784

Our take. Great bargain on a feature-filled sedan, but, “usually, a car that costs a lot of money to buy will cost a lot of money to maintain,” auto-enthusiast website Hotcars.com notes.

 

Audi A6

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2. Audi A6. Average new price $63,931, One-year depreciation, 41 percent. Average year-old price, $26,199

Our take. Consumer Reports calls the interior “a delight,” but the magazine's reliability rating for the A6 of just 1 on a 5-point scale is off-putting even though its owner satisfaction score is a commendable 4 of 5.

 

Jaguar XE SE

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3. Jaguar XE. Average new price, $50,371. One-year depreciation, 40.9 percent. Average year-old price, $29,786

Our take. A fun-to-drive compact luxury sedan that gives us second thoughts because its reliability and owner satisfaction scores both are low, Consumer Reports says: 2 out of 5.

 

2019 black Volvo S90

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4. Volvo S90. Average new price, $58,970. One-year depreciation, 40.1 percent. Average year-old price, $35,339

Our take. We are skeptical. While CNET's Roadshow auto review publication likes its looks and solid feel, it cautions, “Some of the tech is unintuitive, and this is not a driver's car."

 

BMW 3 Series

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5. BMW 3 Series. Average new price, $50,369. One-year depreciation, 38.2 percent. Average year-old price, $31,128

Our take. Consumer Reports’ reliability rating of 1 out of 5 puts a wrench in the works. The 2012 to 2018 models scored better. Apparently, the 2019 has tempting upgrades such as improved handling and good fuel economy, but dependability has to be a part of that list.

6. Chevrolet Camaro. Average new price, $44,492. One-year depreciation, 37.8 percent. Average year-old price, $27,663

Our take. We wonder what the Ford Mustang and Dodge Challenger — Camaro's direct rivals — did differently to avoid such a steep fall in value. Even though they're not on the list, we would check their year-old prices, too, if we were shopping for a used sporty coupe. Buoying that: Consumer Reports’ reliability scores differ, showing Mustang at 3 of 5 and Challenger at 5 of 5 in recent model years. Camaro: 1 of 5.

7. BMW X6. Average new price, $84,042. One-year depreciation, 37.7 percent. Average year-old price, $52,387

Our take. First, this SUV is not for everybody. It has a hatchback-like sedan body, giving you a less-roomy interior than a “real” SUV but clearly provides visual distinction. A Mercedes-Benz GLA is a similar take, though smaller. Even after the BMW's steep depreciation, it still seems pricey to us. Consumer Reports posts no reliability scores on older versions but forecasts that the 2020 will come in at 2 of 5.

8. Land Rover Ranger Rover Evoque. Average new price, $56,507. One-year depreciation, 37.3 percent. Average year-old price, $35,427

Our take. To understand the cumbersome name, know that Land Rover's the parent brand, Range Rover is the luxury line within that brand and Evoque is the oh-so-highly-styled model. U.S. News & World Report, which looked at reviews from 45 other publications, calls it a “so-so” luxury subcompact SUV. That amalgamation also shows subpar reliability ratings. The 2020 redesign provided more rear legroom and more standard infotainment features.

9. Mercedes-Benz CLA. Average new price, $42,793. One-year depreciation, 37 percent. Average year-old price, $26,955

Our take. A Mercedes for $27,000 is tempting. But owner satisfaction has been poor though reliability has been OK, 3 out of 5, Consumer Reports says. And it's smaller than the BMW X6, above, possibly too small for some needs, especially in the trunk.

10. BMW 4 Series. Average new price, $52,951. One-year depreciation, 35.8 percent. Average year-old price, $33,991

Our take. Dependability is a strong point here, 4 out of 5, according to a U.S. News article that cites consumer survey veteran J.D. Power and Associates. The cars are what once would have been called a 3 Series coupe, spawned into its own space of two-door models.

Best vehicles to buy new

Tesla Model 3 at a charging station

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1. Tesla Model 3. Average new price, $48,650. One-year depreciation, 5.5 percent. Expected average year-old price, $46,121

Our take. If right-now acceleration pleases you, you're a candidate for an electric car such as the Model 3. Electric motors deliver full power the instant they begin to turn. Gasoline engines have to rev up. But it can take all day to recharge a Model 3 if its battery is dead and you're not using one of the so-called “super chargers” at some public sites.

 

Ford Ranger

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2. Ford Ranger. Average new price $36,290. One-year depreciation, 11.4 percent. Expected year-old price, $32,573

Our take. Ranger, reintroduced in the U.S. in 2019, is an Americanized version of a Ford midsize pickup on sale overseas since about the time the small U.S. Ranger was discontinued in 2011. Reviews tend to celebrate its powerful four-cylinder engine and smooth 10-speed transmission as well as generous standard features. But, as Car and Driver noted in a test of the 2019, the Ford had a “half-finished feel,” as well as a long stopping distance. Consumer Reports gives it a 4 out of 5 on predicted reliability.

 

2022 Chevrolet Traverse Premier

Chevrolet

3. Chevrolet Traverse. Average new price, $40,174. One-year depreciation, 11.7 percent. Expected average year-old price, $35,976

Our take. Its innovative Buckle to Drive option won't let the driver take the transmission out of “park” if the seatbelt is not fastened — at least for the first 20 seconds. It is active when the “teen driver” mode is engaged for any age pilot. Traverse claims the most cargo space of any mid-size SUV in its class. But you must buy the most expensive models to get the full range of safety features. Consumer Reports rates it 1 out of 5 in reliability.

 

Honda Civic Hatchback

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4. Honda Civic hatchback. Average new price, $25,390. One-year depreciation, 11.9 percent. Expected average year-old price, $22,686

Our take. The roomy interior for a compact is nicer inside than expected. Consumer Reports nudges shoppers toward the optional, quicker turbocharged engine while also giving a high-five to the base, nonturbo LX version because of its traditional knobs and buttons instead of overly complicated touch screen controls. Yet it cautions that Civic sits quite low, a bane to some.

 

Honda Fit Sport

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5. Honda Fit. Average new price, $19,049. One-year depreciation, 12.5 percent. Expected average year-old price, $16,938

Our take. This is a handy, very affordable subcompact hatchback with multi-folding seats for creative cargo carrying. In our view, the Kia Soul is nicer though a bit pricier — and nowhere on the iSeeCars list. Fit's alluring price shouldn't blind you. It's pretty small and not well suited for trips despite that cargo versatility. Consumer Reports calls it an “urban runabout."

6. Subaru Crosstrek. Average new price, $27,006. One-year depreciation, 13.1 percent. Expected average year-old price $23,868

Our take. The small crossover SUV is available with a full suite of safety features. It gets top marks from the National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety. All-wheel-drive is standard on all Subarus except the BRZ rear-drive sports car. The 2021 comes with a more-powerful engine than the 2020. Will buyers clamor for it, perhaps accelerating depreciation of the 2020 you might be tempted to buy new?

7. Chevrolet Corvette. Average new price, $67,825. One-year depreciation, 13.6 percent. Expected year-old price, $59,712

Our take. We'll see. The 2020 is the first Corvette to have its engine in the middle, just behind the driver. All the others back to the original 1953 have been conventional front-engine sports cars. The 2020's starting price is just less than $60,000, but options are plentiful. You can spend $395 to have a special safety belt color.

8. Honda Accord. Average new price, $26,363. One-year depreciation, 13.7 percent. Expected average year-old price, $23,185

Our take. Well respected for a combination of traits, Car and Driver's “best-driving family sedan [also is] one of the best-equipped choices in its class, making it an easy recommendation.” But its gear selector is an “unintuitive push button,” Consumer Reports says. Rival Toyota Camry typically outsells Accord and notches higher in some reliability surveys. But it didn't make this list.

9. Honda Ridgeline. Average new price $38,549. One-year depreciation, 13.8 percent. Expected year-old average price, $33,885

Our take. Our test drives make clear the Ridgeline is the smoothest of any mid-size pickup. That comes from its unibody construction, like the Honda Odyssey minivan and Honda Pilot SUV, to which it's related. A unique trunk submerged in the cargo bed gives it locking storage. It can carry as much weight as a full-size half-ton pickup but tows less than mid-size rivals and is not meant for off-roading. You decide which points are most relevant for you.

10. Dodge Charger. Average new price, $33,647. One-year depreciation, 13.9 percent. Expected year-old average price, $29,550

Our take. The traditional big U.S. four-door sedan is available with rear-wheel drive or all-wheel drive, which Dodge is pitching as a winter commando. Most models are sporty, and rear-drive models are available with a Hemi V-8 engine if you want to leave some tire smoke when the light turns green. Dodge calls Charger the only four-door muscle car, but you also can get a reasonably tame version. Consumer Reports calls it “a bargain luxury sedan” and gives it an above-average reliability of 3 of 5.

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