Let's start with some basics. Here's a standard rule of thumb about used cars. A car loses 15 percent to 20 percent of its value each year.
A 2-year-old car will be worth 80 to 85 percent of its 1-year-old value. A 3-year-old car will be worth roughly 80 to 85 percent of its 2-year-old value.
Let's say you have a 1-year-old used car worth $12,000 that loses 15 percent of its value each year. At 2 years old, the car would be worth $10,200. At 3 years old, it would be worth $8,670.
The depreciation in a car's first year tends to be even steeper. A new-car owner feels the sting immediately. A new car loses a big chunk of its value as soon as you drive it off the lot. Here's why.
When purchasing the car, you paid a retail price -- the price a dealer charges for a car.* As soon as you're off the lot, the car is worth its wholesale price, the amount a dealer would be willing to pay for a car should you turn around and head back.
So a brand-spanking-new car or truck loses thousands of dollars of value as soon as you drive it home. Whatever money you spent on taxes and licensing is gone for good as well.
"Just the difference between wholesale and retail prices is a large amount of what goes away right away," says Charlie Vogelheim, editor of Kelley Blue Book.
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