Car Depreciation, Explained for Buyers and Owners

Depreciation is the value your car loses over time. It is the gap between what you paid and what it is worth later. AAA says it is the biggest cost of owning a car, about $4,334 a year. A study of five-year-old cars found the average one lost 41.8% of its value. EVs lost the most, 57.2%. Trucks lost the least, 34.2%.

AutoNetwork gives car education, not financial or tax advice. Averages are not a promise of what your car will be worth.

Checked against the cited sources on October 28, 2026.

Car values change with the market. Use these numbers as a guide, then get a real quote for your own car.

Short answer: Depreciation is the value your car loses over time. It is the gap between what you paid and what it is worth later. AAA says it is the biggest cost of owning a car, about $4,334 a year. A study of five-year-old cars found the average one lost 41.8% of its value. EVs lost the most, 57.2%. Trucks lost the least, 34.2%.

Sources: AAA — Your Driving Costs 2025 (Sept. 16, 2025) (https://mwg.aaa.com/news/press-release/september-16-2025; checked 2026-10-28); iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

The problem

You can see a car payment. You can see a gas bill. But the biggest cost of owning a car is one you never get a bill for. It shows up when you trade in, and you get far less than you hoped. Some buyers even owe more than the car is worth. Roosevelt has watched this happen for 40 years. This guide helps you plan for it before you buy.

Roosevelt's plan

  1. Know the average. Use the calculator on this page. See about how much a car like yours may lose over the years you plan to keep it.
  2. Pick and pay wisely. Choose a type that holds value. Put money down. Keep the loan short so you do not owe more than the car is worth.
  3. Protect its value. Keep service records, keep the miles reasonable, and get real quotes before you trade in.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28); CFPB — Should I trade in my car if it's not paid off? (https://www.consumerfinance.gov/ask-cfpb/should-i-trade-in-my-car-if-its-not-paid-off-en-2045/; checked 2026-10-28)

1. What depreciation is

Depreciation is the value a car loses over time. Say you pay $40,000 and the car is worth $24,000 five years later. It has lost

AAA calls depreciation the most significant cost of owning a vehicle. In its 2025 study, it averaged $4,334 a year. That was about 37% of the

You do not pay it in cash each month. You pay it when you sell or trade the car and get back less than you paid.

Sources: AAA — Your Driving Costs 2025 (Sept. 16, 2025) (https://mwg.aaa.com/news/press-release/september-16-2025; checked 2026-10-28)

2. How depreciation is figured

The math is simple. Take the price you paid. Subtract what the car is worth today. That number is how much value it has lost. Divide it by the price to get a percent.

Example: you paid $40,000. A dealer offers $26,000. You lost

What the car is worth depends on what buyers will pay for it. Its age, miles, condition, accident history, trim and how many people want that model all matter.

Studies use their own methods. The iSeeCars study compared each model's original sticker price, adjusted for inflation, with the average asking price of five-year-old ones. It looked at over 950,000 cars sold from March 2025 to February 2026.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

3. Why value drops when you drive off the lot

Once a new car is sold to you and titled, it is a used car. When you sell it, it sells at used-car prices, not new-car prices.

Part of what you paid also does not come back. Dealer fees, taxes and add-ons are part of your price, but a buyer later pays only for the car itself.

You will see claims that a car loses a set percent the moment it leaves the lot. We could not confirm one number from a source we trust, so we do not list one. What we can say: the loss is real, and you feel it most if you sell or trade soon after you buy.

4. Why depreciation matters to you

Depreciation decides your trade-in value. It also decides whether you owe more than your car is worth. That is called negative equity, or being upside down.

The CFPB says negative equity means your loan payoff is more than your trade-in value. If you roll that amount into a new loan, it will raise your total loan cost and the interest you pay.

It also matters if your car is totaled or stolen. Insurance pays what the car is worth, not what you owe. GAP coverage is meant to cover that difference. The CFPB says GAP is optional, and if you finance it, it adds to your loan amount.

Sources: CFPB — Should I trade in my car if it's not paid off? (https://www.consumerfinance.gov/ask-cfpb/should-i-trade-in-my-car-if-its-not-paid-off-en-2045/; checked 2026-10-28); CFPB — What is GAP insurance? (https://www.consumerfinance.gov/ask-cfpb/what-is-guaranteed-asset-protection-gap-insurance-en-797/; checked 2026-10-28)

5. Which vehicles lose the most and least

In the iSeeCars five-year study, the average vehicle lost 41.8% of its value. Here is how types compared.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

6. Do AWD and 4WD hold value better?

Many buyers believe all-wheel drive or four-wheel drive helps resale. We looked for U.S. data that compares the same model with and without it. We did not find a source that measures it, so we do not give a number.

What we do know: trucks, which are often sold with 4WD, lost the least of the vehicle types in the iSeeCars study. That study did not split results by drive type.

AWD or 4WD usually costs more up front. Buy it because you need it for your weather, roads or towing, not because you expect it to pay you back at trade-in.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

7. EVs and depreciation

EVs lost the most value of any type in the iSeeCars study: 57.2% over five years.

Federal EV tax credits ended. The IRS says the new, used and commercial clean vehicle credits are not available for vehicles acquired after September 30, 2025. The used EV credit had been up to $4,000.

People point to new-car price cuts, fast-changing technology and battery worries as reasons. No source we checked measures how much each one matters, so treat them as possible reasons, not facts.

A battery health report and the time left on the battery warranty can help a used EV's value. They give the next buyer proof. See our EV battery guide for how to check.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28); IRS — Clean vehicle tax credits (https://www.irs.gov/clean-vehicle-tax-credits; checked 2026-10-28); IRS — Used clean vehicle credit (https://www.irs.gov/credits-deductions/used-clean-vehicle-credit; checked 2026-10-28)

8. Should depreciation affect what you buy?

Yes, as one part of total cost. It should not be the only part. A car that loses more value may still cost less to fuel, fix or insure.

How long you keep the car matters most. If you trade every two or three years, value loss hits you hard. If you keep a car for many years, it matters less.

A car a few years old has already taken part of its value loss. That can make it a smart buy, as long as it checks out.

Leasing builds depreciation into your payment. You pay for the value the car is expected to lose while you drive it.

9. How to slow your car's value loss

You cannot stop depreciation, but you can avoid making it worse.

10. Other things worth knowing

The market can move values. Cox Automotive says used-car prices peaked in December 2021. By December 2023 they were down nearly 21% from that peak. In December 2025 they were up just 0.4% from a year before.

Business use is different. For taxes, the IRS treats cars and trucks as five-year property and limits how much you can write off. For passenger cars put in service in 2025, the first-year limit is $20,200, or

After a crash, your repaired car may be worth less. That loss is called diminished value. Washington state's insurance office says you usually file that claim with the at-fault driver's insurer, and it is not paid on its own. Rules differ by state, so ask your state insurance office.

Sources: Cox Automotive — Manheim Used Vehicle Value Index, December 2023 (https://www.coxautoinc.com/insights/december-2023-muvvi/; checked 2026-10-28); Cox Automotive — Manheim Used Vehicle Value Index, December 2025 (https://www.coxautoinc.com/insights/manheim-used-vehicle-value-index-december-2025-trends/; checked 2026-10-28); IRS — Publication 946, How to Depreciate Property (2025 returns) (https://www.irs.gov/publications/p946; checked 2026-10-28); Washington Insurance Commissioner — Filing an auto insurance claim (diminished value) (https://www.insurance.wa.gov/insurance-resources/auto-insurance/auto-insurance-claims/filing-auto-insurance-claim; checked 2026-10-28)

Before you buy or trade in

Sources: CFPB — Should I trade in my car if it's not paid off? (https://www.consumerfinance.gov/ask-cfpb/should-i-trade-in-my-car-if-its-not-paid-off-en-2045/; checked 2026-10-28); CFPB — What is GAP insurance? (https://www.consumerfinance.gov/ask-cfpb/what-is-guaranteed-asset-protection-gap-insurance-en-797/; checked 2026-10-28)

What to say

Questions buyers ask

What is car depreciation?

It is the value a car loses over time: what you paid minus what it is worth now.

Sources: AAA — Your Driving Costs 2025 (Sept. 16, 2025) (https://mwg.aaa.com/news/press-release/september-16-2025; checked 2026-10-28)

How much does a car lose in five years?

In the iSeeCars study, the average vehicle lost 41.8% over five years. Your car may lose more or less.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

Is depreciation really the biggest cost?

AAA says yes. It found depreciation averaged $4,334 a year in 2025, more than any other cost.

Sources: AAA — Your Driving Costs 2025 (Sept. 16, 2025) (https://mwg.aaa.com/news/press-release/september-16-2025; checked 2026-10-28)

Why does a new car lose value when I drive it off the lot?

Once it is titled to you, it is a used car and sells at used-car prices. Fees, taxes and add-ons you paid do not come back.

Which vehicles hold value best?

In the iSeeCars study, trucks lost the least of the types listed, at 34.2%. The Porsche 718 Cayman lost only 9.6%.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

Do AWD and 4WD cars hold value better?

We found no U.S. data that measures it. Buy AWD or 4WD for your needs, not for resale.

What does upside down mean?

You owe more on the loan than the car is worth. The CFPB calls this negative equity.

Sources: CFPB — Should I trade in my car if it's not paid off? (https://www.consumerfinance.gov/ask-cfpb/should-i-trade-in-my-car-if-its-not-paid-off-en-2045/; checked 2026-10-28)

Should I roll my old loan into a new one?

The CFPB says it will raise your total loan cost and the interest you pay. Ask to see the numbers first.

Sources: CFPB — Should I trade in my car if it's not paid off? (https://www.consumerfinance.gov/ask-cfpb/should-i-trade-in-my-car-if-its-not-paid-off-en-2045/; checked 2026-10-28)

Does GAP stop depreciation?

No. GAP is optional. It is meant to cover the gap between what you owe and what insurance pays if the car is totaled or stolen.

Sources: CFPB — What is GAP insurance? (https://www.consumerfinance.gov/ask-cfpb/what-is-guaranteed-asset-protection-gap-insurance-en-797/; checked 2026-10-28)

Is buying a used car better for depreciation?

A car a few years old has already lost part of its value, so you lose less. Check its history and condition first.

Why do EVs lose so much value?

EVs lost 57.2% in the iSeeCars study. Price cuts, new tech and battery worries are often named, but no source we checked measures them.

Sources: iSeeCars — Cars That Hold Their Value (5-year study, sales Mar 2025–Feb 2026) (https://www.iseecars.com/cars-that-hold-their-value-study; checked 2026-10-28)

Is the used EV tax credit still available?

No. The IRS says it is not available for vehicles acquired after September 30, 2025.

Sources: IRS — Used clean vehicle credit (https://www.irs.gov/credits-deductions/used-clean-vehicle-credit; checked 2026-10-28)

How can I protect a used EV's value?

Keep a battery health report and know when the battery warranty ends. Both give the next buyer proof.

Can I deduct depreciation on my car?

Only for business use, under IRS rules with yearly limits. Ask a tax pro.

Sources: IRS — Publication 946, How to Depreciate Property (2025 returns) (https://www.irs.gov/publications/p946; checked 2026-10-28)

Ignore depreciation, and you may owe more than your car is worth when life changes and you need a new one.

Plan for it, and you trade in on your terms, with value left over to put toward your next car.

Next steps

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