At What Mileage Do Cars Depreciate the Most?

Depreciation is a decrease in the value of an asset that takes place over time due to wear, tear, or usage. A car’s maximum depreciation is usually seen during the first year and gradually decreases. It’s typically calculated as “depreciation per thousand miles of use.”

Why do cars depreciate?

Typically, cars depreciate because they are used and reach their lifetime limit. Vehicles within the same mileage bands tend to worsen less than those who start with many miles under their treads. This also plays into why newer cars depreciate less than older cars. By looking at the average gas mileage of a vehicle and the average number of miles it can be driven in a year, we can see how quickly they depreciate based on mileage and age.

Why is mileage important?

The age of a car doesn’t matter when it comes to calculating depreciation. What does, however, is the miles a car can travel on average and the average number of years it can be driven before needing to be replaced. To compare cars, we take the highest mileage for each model year and divide that number by the highest number of miles in a year. This gives us a percentage of how much each model year depreciates per a thousand miles driven.

How to minimize depreciation

Car buyers

Car buyers who want a car to last longer than the average life of a car can purchase a new or used car with fewer miles. Instead of getting an older car that has already traveled 40,000 miles, they could get a used car with 10,000 or fewer miles. By minimizing the number of miles on their vehicles and driving them less, they will extend the longevity of their cars and reduce the amount they depreciate.

Car sellers

Car sellers have control over how much their cars depreciate by either focusing on purchasing low-mileage vehicles to sell at their dealerships or selling off high-mileage vehicles after they reach peak depreciation. By selling their used cars at high mileage, they can help avoid letting the vehicles they sell depreciate more than they should.

Insurance companies

Insurance companies often charge higher rates for drivers who put more miles on their cars. By keeping their cars at low mileage and paying attention to the types of accidents they get into, passengers can avoid depreciating the value of their insurance coverage and subsequently avoid more expensive premiums in the future.

Review possible tax write-offs

Certain types of depreciation can be written off the tax returns you may or may not know about. Cars, in particular, can be depreciated on the value of everything inside them, including the tires and engines. If you want to deduct some depreciation on your taxes, leasing a car is your best bet.

Buy at auction dealerships

Many used car dealerships have a large percentage of cars that can be purchased from auctions. The same goes for insurance companies; they often sell off high-mileage vehicles that have depreciated more than what’s needed to fill their insurance quotas for the year. Ask your local dealerships if they carry high-mileage cars and get a better deal by buying at auction.

Do the research

By researching, car buyers and sellers can avoid overpaying for a car depreciating more than it should. This is especially important for car sellers because their overpayment can cost them thousands of dollars in the long run.

Get an extended warranty

With an extended warranty, car owners can increase their chances of keeping their cars longer and reduce the amount they depreciate. Extended warranties are more affordable than new cars because they typically cost less than a new car’s retail value after its manufacturer’s expired warranty.

Sell the vehicle for cash to avoid depreciation

By selling off high-mileage vehicles after their warranties have expired, car owners can make some extra money by getting rid of them instead of letting them depreciate. The more money they make from the car, the less they must pay taxes.  Even if the loan hasn’t been completely paid off, you have options to help get the car off your hands.

Don’t buy used luxury cars as your first car

Luxury cars depreciate quickly because they tend to have a high price tag that stays within the amount of depreciation that occurs over time. If you’re buying your first car, try to get a little more affordable so that you don’t have to worry about it depreciating as quickly.

Don’t buy a car based on how it looks

To get a better deal on your next car, focus on the engine and make of the vehicle, not how it looks. By focusing on factors that affect depreciation, you can avoid buying a car that will depreciate faster than you’d like.

Keep up with maintenance

Car owners who make sure that their cars maintain their maintenance regularly can also avoid depreciating more than they should. If you keep up with regular maintenance, such as oil changes, repairs, and cleaning your car’s interior, your car will last longer and depreciate less.

Renting out your car

Rentals give you several benefits: they can be used for short-term trips, like road trips, or long-term trips, like vacations or business travel; they’re often cheaper than buying a brand new car; and you can get rid of your old car quickly by renting it back out. By renting with any company that keeps depreciation to themselves and letting them depreciate your rental further, you’ll have an easier time keeping your first vehicle as low on the depreciation scale as possible.

Last Words

By following the above steps, you can learn how to keep your car lower on the depreciation scale to have less money to spend on paying off loans and financing. In the long run, it could save you a lot of money.