Cars with the Highest Depreciation: What to Avoid

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

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 saving you money 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.