# Do cars drop 7% in value every month?

In their email communication car-buying organization wijkopenautos.nl (wkda.de) claims cars drop 7% in value each month. Their exact claim is:

Let op: een auto verliest iedere maand ongeveer 7% aan waarde, ongeacht hoe vaak er mee wordt gereden. Veelgereden auto's, auto's van pendelaars en stadsauto's hebben over het algemeen meer slijtage. Ook auto's die veel in de garage staan, zijn reparatiegevoelig. Door inactiviteit lekt er veelvuldig olie in de motor en ontstaat er sneller roest.

Translation by me:

Note: a car loses about 7% in value every month, regardless of how often it is driven. Frequently driven cars, cars of commuters and city cars generally show more wear. Even cars that are often in a garage are repair-prone. As a result of inactivity, oil will frequently leak into the engine and it will rust quicker.

That 7% per month seems excessively high to me. It would mean a car loses 60% of its value over a year, and would only be worth 7% of its original value after 3 years.

Do cars drop 7% in value every month?

• Generally, the number of kilometers driven is considered the only real factor when you buy a used car in Denmark. Cars that have driven 100000km+ generally do not loose 50% of their cost. Old cars in particular. I generally only get cars that have driven at least 20000+ km/year when I buy a diesel car, just to make it more likely that they car been driven properly. Commented Apr 19, 2018 at 11:19
• I hope it is just the translation that is bad. Oil doesn't usually leak INTO the engine. It leaks OUT.
– JRE
Commented Apr 19, 2018 at 11:29
• It's probably excessive (for the US) but not totally ridiculous, for your average car in it's first few years. Sites I look at say 15-25% a year. Google `car depreciation`. Commented Apr 19, 2018 at 12:06
• Just a bit of math: 7% per month equals to 58% in a year (0.93^12). I guess this may be a bit too high. If it would be 25% per year this would equal to only 2.4% per month (0.75^(1/12)). Commented Apr 19, 2018 at 12:16
• @JRE I agree it doesn't make much sense. "In" in Dutch is a bit more versatile than "in" in English, since it can mean something like "going in"/"into" but also "being in"/"inside". "Inside" doesn't make much sense to me either. It's a very strange sentence. Commented Apr 19, 2018 at 12:32

When buying a new car, a car will depreciate around 11% just driving it off the lot. However, after this first trip, the depreciation rate falls drastically.

Rates of depreciation on cars are highest when purchasing new, and when driving off the lot. Trusted Choice wrote in an article "Car Depreciation: How Much Have You Lost?"

The newer the car, the faster its rate of depreciation. Are you wondering, "What will my car be worth?" Consider this: The moment you drive your new car off the lot, it will depreciate by as much as 11 percent of its value.

(...)

That means that if you purchase a \$20,000 vehicle, it will lose as much as \$2,200 in value just by the simple act of your driving it home.

However, this depreciation is short lived, and can hardly be estimated across all makes and models.

In general, popular cars are easier to sell as used vehicles. In this case, depreciation rates will be slower than cars that are difficult to sell. Some vehicles just never seem to catch on, though they may be great cars with fantastic features. A fast depreciation rate does not necessarily reflect on the reliability or performance of the car.

Other factors can affect depreciation. For example, the recent spike in gas prices caused depreciation rates on gas guzzlers to increase at an alarming rate. Some of the hardest hit vehicles were SUVs and Hummers. As a result, crossovers, with their better gas mileage, have been gaining in popularity over the past few years.

The article lists the five fastest depreciating cars at the time of the article.

• Fiat 500L – 34.6 percent price different between new and 1-year old vehicle for a total of \$8,096 decline.
• Lincoln MKS – 34.5 percent price different between new and 1-year old vehicle for a total of \$16,039 decline.
• Volvo S60 – 34.4 percent price different between new and 1-year old vehicle for a total of \$14,204 decline.
• Kia Cadenza – 34.3 percent price different between new and 1-year old vehicle for a total of \$12,940 decline.
• Mercedes C250 – 34.3 percent price different between new and 1-year old vehicle for a total of \$15,247 decline.

Note that even in the worst case in the article (The Fiat 500L) the depreciation rate over the first year seems to be closer to 3.5% than the 7% found in the claim.

GoodCalculators.com has a vehicle depreciation calculator as well, and while you can set custom depreciation rates, the website states

The average car depreciation rate is 14% per year.

Boston.com looked into the depreciation rate of cars just after purchasing (which, again, is the highest rate of depreciation for new cars.)

The used car research company looked at more than 14 million new and used cars sold between August 1, 2015 and July 31, 2016 and found the average price difference between a new car and a one-year-old used car is 21.2 percent.

Furthermore, if the 7% number was correct, a \$20,000 car after 6 years (a standard financing period for cars in the US would leave the car at

\$20,000 * (0.93 ^ 72) = \$107.59

A quick search on iseecars.com for cars available nationwide with value under \$350 returns 8 cars total.

• 1994 Honda Accord - 230,000 miles
• 1998 Nissan Altima - 180,000 miles
• 1999 Ford Taurus - Mileage Unlisted
• 2014 Volkswagen CC Sport - Mileage Unlisted(1)
• 2004 Mitsubishi Eclipse GS - 145,000 miles
• 2004 Saturn Ion 1 - Mileage Unlisted
• 1993 Chrysler New Yorker Fifth Ave - 142,300 miles
• 1998 Chevrolet Malibu LS - 264,000 miles

(1) There is very little information on this Volkswagen, and it seems to be an aberration. Searches for similar cars return prices in the \$10,000+ range.

• This doesn't seem to consider maintenance costs. The original statement strongly implies that maintenance costs are part of the claim. With some creativity they may also include the average risk of accident-related or generally user-error-related value loss. Commented Apr 19, 2018 at 19:20
• Maintenance costs are usually included in the "cost of ownership" but not in the value. My reading of the claim says that when you go to sell the car, it's value will have depreciated 7% for every month you've owned it. See "a car loses about 7% in value every month, regardless of how often it is driven" Commented Apr 19, 2018 at 19:58