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Best Cars That Depreciate Rapidly

by Emily Guy Birken

A recent Polk analysis of vehicle registration data shows that the American fleet of cars is getting much older: the average vehicle has been on the road for 10.8 years, which is the oldest average age recorded since Polk started tracking these figures in 1995.

What this means for the average driver is that purchasing a used car is getting much more expensive. Between the national economic woes—which led to drivers holding onto their cars longer—and the 2009 Cash for Clunkers program that removed more than 690,000 used cars from the road (and used car market), there is simply not as big a supply of used cars available for purchase.

That does not mean that you can’t find a good deal on a quality used car. You just might have to look for cars that are undervalued and under-appreciated. Here’s how:

A Reputation is Slow to Change

Car depreciation - a buying opportunity!Anyone who has tried to buy or sell a used car in the past twenty years knows that both Hondas and Toyotas have a great reputation for reliability, good gas mileage, and endurance. As such, they retain their value much better than other used cars.

The thing about reputation, though, is that even if a car manufacturer has been stumbling somewhat lately, the halo effect will keep people trusting in the brand. Fortunately, the opposite is also true. Car brands that have done poorly in the past will still retain their bad reputation even after they have recovered their mojo.

For example, Ford has been working steadily to improve its offerings for the past five or so years. But people still remember the Ford vehicles that were not exactly a tribute to the American auto industry. It’s possible to snap up a five-year old Ford Taurus in good condition for around $7,000, when the original MSRP was between $23,000 and $30,000, depending on the extras.

For comparison, a Honda Accord of the same year retailed between $19,000 and $28,000, and to purchase one in good condition now will set you back nearly $11,000.

Subcompacts Tend to Depreciate Like Rocks

According to Hannah Elliot, reporting on Forbes.com, “the cars that lose value quickly tend to cluster on the other end of the automotive spectrum–budget-friendly subcompacts like the Kia Rio and the Hyundai Accent.” This is because compact and subcompact cars start off cheap and only appeal to a small demographic—which becomes smaller when talking about the used car market.

However, these tiny cars can give you a lot of bang for your automotive buck. If you only need transportation to get from point A to point B, there is no reason a used subcompact couldn’t fit your needs for a lot cheaper than a typical sedan. In the case of the Kia Rio and the Hyundai Accent, a good condition five-year-old model will only cost you about $5500 for the Kia and $6500 for the Hyundai. (The MSRP values for these cars in 2007 were in the $10,000 to $14,000 range.)

These Korean brands may be relative newcomers to the U.S. automotive market, but they have been here long enough to show a fairly reliable track record, particularly in their long-running subcompact vehicles.

When Luxury Loses Its Shine

In general, luxury cars tend to hold onto their values fairly well, as everyone likes to feel pampered, even if they can’t afford a new luxury vehicle. However, American luxury cars like the Cadillac GTS and the Mercury Grand Marquis have suffered from the poor reputation staining all three of the Big Three manufacturers. Since part of owning a luxury car is the ability to display a brand name to friends and neighbors, these two vehicles are victims of their manufacturers’ bad press.

It’s possible to snap up these cars for a fraction of their retail costs because other luxury brands have a great deal more cache these days. A good condition 2007 Cadillac GTS will go for around $12,600, when it retailed at the time for $30,000 to $36,000, while the Grand Marquis can be bought for the very low price of $9500, down from $25,000 to $28,000 in 2007. The discontinuation of the Grand Marquis in 2011 is partially responsible for its current low price.

The Bottom Line

While great deals can be found on any number of used cars, it always pays to do research on any model you are interested in. As car enthusiasts like to say, there is nothing in the world more expensive than a cheap Mercedes.

In addition, when you find your used car, make sure you have a trusted mechanic look it over from top to bottom. The search for a cheap ride should not end up costing you more in the long run because of problems you didn’t know to look for.

Note: Current used car prices were found using Kelley Blue Book.  I compared the basic sedan price for a private party sale assuming 72,000 miles on each vehicle.

Photo Credit: Thomas Hawk


Published or updated July 31, 2012.
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{ 5 comments… read them below or add one }

1 Manette @ Barbara Friedberg Personal Finance

Great post. I remember my first car was a used Toyota. The first owner has used it for three years but I was able to use it for five more years. Now I have a Honda Accord, which I have been using for the past two years. Buying a used car is sometimes a risk, but if you know what to look for before you purchasing one and you know how to take care of your vehicle, it will definitely serve you more years than you expected.

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2 Charlotte @ HIMMB

We have always kept our cars for 8-10 years. I love not having a car payment. I don’t understand how people lease cars and always have a car payment. We get letters from our dealer wanting us to trade in our cars. Maybe in a few years we’ll take them up on it.

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3 Ryan Guina

I’ve received those trade-in letters as well — “our inventory on model, year, fill-in-the-blank, is running low and we need your car! Come trade it in for more than book value!” Of course, they are hoping to make it up on the back end by selling you a car at a hefty profit, or at a higher interest rate than you could get through bank financing.

I’m with you, though, I prefer no car payments. The last time I bought a car with a loan was almost seven years ago, and I still have the car. I plan on keeping it until the maintenance is more expensive than replacing it. So far, though, it’s been remarkably reliable and inexpensive to maintain. It should easily last me another 5+ years.

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4 William @ Drop Dead Money

Another thing to consider is gas mileage, but not in the way you might think.

When gas prices go up, the price of gas guzzlers goes down. several years ago, we bought a Ford Crown Victoria with 60,000 miles for a song, because gas prices had a spike. We crunched the numbers: with the miles we drove back then, the difference in gas expense came to something like $70 a month. That’s less than $1,000 per year. We got the car for like $6,000 less than a comparable Accord or Camry (same age, same miles). So, for six or seven years, the extra gas money was in effect a delayed payment for a roomier, more comfortable car.

And then we discovered something we never thought of before: insurance. Crown Vics (and Grand Marquis) are the best cars for insurance companies, bar none. They had lower premiums than any other make or model. We ended up saving more than half the gas money every month just on lower insurance. In California at the time, most people paid more per month in insurance than gas. So saving on insurance paid better than saving on gas!

Other states may differ, but the point we learned is we often overlook the insurance factor, and that may be as much as the gas factor. It was a pleasant learning experience – how often do we have those? :)

Sure, the old boat didn’t register on the cool scale at all (especially in Southern California) but it was comfortable and always good for a laugh, especially with the license plate I got for it: Wm’s Boat.

The Crown Vic gave us five years of terrific service. Because it was comfortable we took several road trips and really racked up the miles. With no problems at all. Those American rear wheel drive cars are bullet proof. We sold it for near what we paid for it after five years of trouble free motoring. One of the best car deals of our lives…

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5 Ryan Guina

Sounds like a great deal, William. Insurance is definitely one of the factors people ignore when buying a car. As Emily wrote in the article, maintenance expenses are also another factor many people fail to consider. Some older imports, such as Jaguar, BMW, and Mercedes don’t cost very much to purchase, but they can be very expensive to repair. It’s always a good idea to consider all the costs of a car before buying (purchase price, mileage, insurance, maintenance, etc.).

Great tip!

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