Buying Used: Let Someone Else Take the Depreciation Hit

September 30th, 2010
2005 Mercedes E-Class wagon: Buy this car for $27,050!

2005 Mercedes E-Class wagon: Buy this car for $27,050!

You’ve all heard this one: “A car starts to depreciate the minute you drive it off the showroom floor.”

I’m not sure whether that sentiment really kept anyone from buying a brand-new car, since automobiles are objects of desire as well as utility. But, unless you’re in the market for a rare specialty car, depreciation will likely be the biggest factor in determining a used car’s worth.

We’ve written about this before, and now Consumer Reports (which of course must read this blog) has come out with recommendations for buying 2005-2009 used cars based on their depreciation—the difference between the car’s original base MSRP and a current average dealer price.

The article lists the top five cars by depreciation in ten categories—small cars, SUVs, family cars, etc., plus categories for coupes and convertibles. To make the list, cars had to be good performers, better than average in safety, and at least average in reliability.

So, what are the surprises? Not too many, except for the spread between luxury cars and their lower-priced brethren.

The high-mileage (66,000) 2005 cars depreciated most, naturally, and of these the biggest losers in value were luxury cars. An E-Class Mercedes wagon, costing $82,600 when new, could now be bought from Dealer X for $27,050, a depreciation of 67 percent.

But if you originally bought a 2009 Lexus LS 460L with 20,000 miles for $77,260, you would now pay $60,450, or 22 percent less. The same sort of spread (65-19 percent) was given for what CR calls “upscale cars,” like the Volvo S60 R and Infiniti G37.

The spread for “small cars,” like the Honda Civic EX, ranged from 51 percent for the older, high-mileage cars to 16 percent for the newer ones. Pickups held their value best, with depreciation ranging from 40 to 14 percent, oldest to newest.

Sports cars depreciated almost as much as luxury cars, from 63 to 15 percent, oldest to newest, and in fact those might be your best bargains—if the reliability factor is there. Buying a 2006 BMW Z4 roadster with 51,000 miles for $20,025 sounds pretty good to me, especially when you realize it cost $42,100 new. That’s a depreciation factor of 52 percent.

Don’t forget to use the CarGurus’ DealFinder to help you find your way through the weeds. You’ll find a new appreciation for depreciation.

Do you figure depreciation when buying a used car? How do you do it?

—jgoods

Find Used Cars in Your Area at CarGurus

Used Mercedes E-Class
Used Lexus LS 460
Used Volvo S60 R
Used Infiniti G37
Used Honda Civic
Used BMW Z4

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  1. John
    | #1

    Used cars are a rip-off. Most are returned rentals or leases. These cars are beat. The repair cost will be more than the savings.

  2. panayoti
    | #2

    Agree with reader John that many are indeed ripoffs. With the advent of outfits like Carfax, buying used can be a rewarding experience however. I just bought an ’01 Olds Aurora (think Deville here) that is a one owner with meticulous service records and a clean Carfax. The car is pristine with not a single flaw in the body and is in showroom condition with only 61,000 miles. This is a near $40K car in ’01 and I had the good fortune of buying it for less than $6K. So good deals are out there, if you do your homework and are patient

    On the other hand, scams abound not only with dealers but with individual sellers eager to turn a quick buck with cars that are inherently flawed. Buyers should be aware of John’s points about rental or lease vehicles, many of which have been damaged by collision or water damage that is difficult to detect, especially one that is sold by less than reputable dealers. So always be careful when buying used.

  3. | #3

    I only buy luxury (recently) and I only buy pre-certified owned from the dealer. Personally I would never buy brand new. At the Benz website under pre-certified you can find excellent deals on CLK and E Class for around 20k, even $15k! Of course these are a bit older but not like super old, like 05 cars maybe… I don’t have a formula for calculating depreciation but depreciation is the main reason why I buy used. Plus when you buy pre-certified the car is practically good as new. My Benz now, I bought with 55k miles approx on it and I never had any issues with it whatsoever.

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