Avoiding an Underwater Loan: What Used Cars Depreciate the Least?

Get Car Financing
Even with poor credit.

By

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - August 8, 2018

It’s no secret that there’s no stopping depreciation when it comes to your car. But, just because it can’t be stopped doesn’t mean it can’t be slowed down.

What is Depreciation?

Depreciation is the loss of value over time, and it begins happening to a car as soon as it’s driven off the dealer’s lot. On average, a new car loses about 10 percent of its value once the tires hit the street and close to 20 percent in the first year. After that, cars lose between 15 and 25 percent of their value each year. The depreciation curve is less extreme in years two through five, but gets steeper again around year six.

How do You Keep your Car From Going Underwater?

Negative equity – also known as being underwater – happens when you owe more on your car loan than the vehicle is worth. Because depreciation begins eating away at the vehicle’s value right away, it’s not uncommon for car buyers to slip into negative equity right after purchase.

To offset this early decline in value, one option is to make the largest down payment you can afford. Though the down payment requirement varies by lender, at least a 20 percent down payment typically reduces the loan principal enough to help you avoid most of the effects of negative equity.

You can also slow the effects of depreciation by taking care of your vehicle, keeping it clean inside and out, and making sure regular scheduled maintenance is done on time. Another tip: buy a quality used vehicle that’s already seen its steepest drop in value after two years, but hasn’t reached the six year depreciation drop off point.

Used Cars that Depreciate Least

When you’re buying used, the best bet is to find a car that holds its value. According to Edmunds 2018 Best Retained Value Awards, you’d be wise to shop for a Toyota and Honda. These vehicles depreciate more slowly than other brands. Also reaching the podium with a few vehicles are GMC and Subaru, which tend to retain their value longer than other standard cars.

Here’s a look at some of the top standard vehicles that have the best private party resale value after five years:

  • Compact Car: Honda Civic, Toyota Corolla, Subaru Impreza
  • Compact SUV: Honda CR-V, Toyota RAV4, Honda HR-V
  • Mid-size Car: Honda Accord, Toyota Camry, Subaru Legacy
  • Mid-size SUV: Toyota 4Runner, Jeep Wrangler JK, Toyota Highlander
  • Large Car: Dodge Charger, Chevrolet Impala, Toyota Avalon
  • Large SUV: Toyota Sequoia, Ford Expedition, Chevrolet Tahoe
  • Minivan: Toyota Sienna, Honda Odyssey, Ford Transit Wagon

And in The End

CarsDirect wants to be your next stop for reliable used vehicle shopping. You can use our services to research your options, then fill out our easy online auto loan request form to be matched with a local dealer near you!

Even if you’re struggling with less than perfect credit, we work with a nationwide network if special finance dealers that have the lending resources available to get you into the car you deserve! Don’t hesitate any longer, click here to get started!

Need a Car Loan?

It only takes a minute.

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.