Study: Vehicles with lowest depreciation rates

Karl Brauer says the average new vehicle loses almost half of its value after five years. But some vehicles retain more of their value and depreciate less than average, said Brauer, who is executive analyst for car search engine company, iSeeCars.com.

To identify models with the lowest and highest loss in value after five years, iSeeCars conducted a study analyzing more than 8.2 million car sales.

Trucks, truck-based SUVs and sports cars retain the most value. Luxury sedans depreciate the most.

“For consumers who purchase new vehicles and plan to sell them in the first five years of ownership, choosing a model that retains the most value is a smart economic decision, especially when you consider depreciation is the single large ‘cost' to owning a vehicle,” Brauer said in a news release.

The vehicle with the lowest five-year depreciation: The four-door Jeep Wrangler Unlimited.

The vehicle with the highest: The BMW 7 Series, with an average five-year depreciation of 72.6%.

iSeeCars’ main message in the study is that car depreciation matters. The company says understanding a vehicle’s depreciation is an important factor in helping new and used car shoppers make an informed purchase decision.

Jeep Wranglers: Well-known for value retention

To help people stay informed, iSeeCars started its study by noting which vehicles depreciate the least. After the Wrangler Unlimited with an average five-year depreciation of 30.9%, the Toyota Tacoma came in at No. 2 with a 32.4% average five-year depreciation. The Jeep Wrangler came in at No. 3, followed by the Porsche 911 and the Toyota Tundra.

Toyota led with three vehicles in the top 10, as the Tundra came in at No. 5 and the 4Runner placed sixth.

The Jeep Wrangler Unlimited loses just $12,168 after five years on average. The Jeep Wrangler loses $10,824.

Brauer said that because of their enduring popularity and their durability and performance across all terrains, Jeep Wranglers are known for retaining their value.

“Jeep Wranglers also have maintained their iconic design, so even older models don’t appear dated,” Brauer said.

Four pickup trucks, including the second-ranked Toyota Tacoma, the Toyota Tundra at No. 5, the ninth-ranked GMC Canyon, and the Nissan Frontier at No. 10, made the list.

Brauer said Toyota trucks have a strong reputation for reliability and quality. Consumers who want a rugged hauler and who want a dependable family vehicle like the Tacoma and Tundra, he said.

“The redesigned GMC Canyon holds its value due to its heightened demand from its production hiatus for the 2013 and 2014 model years, making the all-new 2015 model a desirable used truck,” Brauer said, adding that the Nissan Frontier, which has not undergone a redesign since 2004, holds its value because one of the most affordable pickup trucks.

Three models on the list are sports cars. The Porsche 911 came in at No. 4, the Subaru WRX placed seventh, and the Dodge Challenger ranked No. 8.

Brauer explained that Porsche maintains a tight inventory.

“So there aren’t many 911s in the used-car marketplace, and people are willing to pay a premium because it’s an aspirational car,” Brauer said. “The Subaru WRX is also produced in low supply, while the Dodge Challenger has a competitive starting price for the segment and is in high demand because of its classic nature, iconic styling and strong performance.”

The Toyota 4Runner midsize SUV comes in at No. 6, and iSeeCars said that vehicle depreciates 38.5% after five years.

“The Toyota 4Runner has Toyota’s reputation for reliability and indestructibility as a truck-based SUV,” Brauer said. “It has also enjoyed enduring popularity since its release over 35 years ago, which helps contribute to its strong value retention.”

These vehicles depreciate the most

Listing the cars that depreciate the most after five years, iSeeCars said that compared to the average vehicle, the highest-depreciating vehicles lose between 35.4% and 47.9% more of their original value.

Luxury sedans account for eight out of 10 models on the list, with iSeeCars naming the BMW 7 Series superluxury sedan as showing the highest five-year depreciation.

That vehicle loses 72.6% of its value after five years, which amounts to $73,686.

“Expensive luxury vehicles like the BMW 7 Series depreciate steeply because they include expensive features and technology that aren’t valued among used-car buyers,” Brauer said.

The BMW 5 Series ranked second on the highest-depreciating vehicles list. Additional luxury sedans on the list include the fourth-ranked Audi A6, the Maserati Ghibli at No. 5, the sixth-ranked Mercedes-Benz E-Class, the Volvo S60 at No. 7, the eighth-ranked Mercedes-Benz S-Class, and the Lincoln MKZ at No. 9.

Brauer said luxury vehicles depreciate at a higher rate because they are often leased.

That leads to a surplus of three-year-old off-lease versions of those vehicles and results in lowered demand for the older models, Brauer said.

“Moreover, the popularity of sedans has declined, so the price has to significantly drop to make these vehicles desirable in the secondary marketplace to compensate for their high operating costs and outdated technology,” Brauer said.

Regarding the Nissan LEAF, which ranked second, Brauer said that vehicle’s steep depreciation can be attributed to government incentives. Its resale value is based on its lower effective post-incentive sticker price, Brauer said.

“Electric vehicles like the Nissan LEAF also become outdated quickly due to the rapid advancements in range and battery life,” Brauer said.

The tenth-ranked BMW X3 SUV is the third BMW to make the list, and Brauer said a reason for that automaker’s steep depreciation is the high repair and ownership costs of BMWs.

Additional depreciation tidbits

The Honda Fit is the lowest-depreciating vehicle under $25,000, while the Mitsubishi Mirage is the highest-depreciation vehicle under that price. The study also lists the lowest and highest-depreciating vehicles under $35,000, and under $50,000. The Volvo S60 is the highest-depreciating vehicle under $50,000, with an average 5-year depreciation of 67.8%.

By segment, the BMW X3 is the highest-depreciating SUV, and the Tesla Model S shows the lowest average five-year depreciation for hybrid and electric vehicles, at 48.6%.

Another main message from the study: Consumers should anticipate their long-term needs when purchasing a vehicle.

“If you plan on trading in or selling your vehicle after a few years, a car that retains most of its value can put more money in your pocket for your next car purchase,” Brauer said. “Conversely, if you are a used car shopper, choosing a car that has already taken a depreciation hit can provide you with a substantial deal.”

Top 10 Vehicles With the Lowest Depreciation