Cars with the Highest Depreciation Rates for 2023

Valerie Raskovic

Dec 06, 2023

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Cars with the high depreciation rates tend to experience a rapid decline in value over a relatively short period. Several factors contribute to this phenomenon, including initial purchase price, brand perception, reliability, repair/maintenance costs and market demand. Certain models are more susceptible to significant depreciation, making them noteworthy for consumers mindful of long-term and low-cost ownership. The three primary categories encompassing the highest depreciating vehicles include Luxury, EV/Emerging technology and High-Cost-to-Own vehicles.

Luxury vehicles are especially susceptible to rapid depreciation mainly attributed to their high-tech features, higher maintenance costs and premium price tags. The allure of the latest technology and premium features and build materials diminishes over time and is not as relevant when they hit the used car market, greatly effecting the pre-owned vehicles desirability. Hence, majority of luxury vehicle experience a higher rate of depreciation over the first 5 years.

Another category of vehicle seeing a high rate of depreciation are full electric vehicles and hybrid vehicles. The accelerated depreciation is primarily ascribed to two key factors. Concerns regarding battery life constitute a significant factor, particularly for vehicles like EVs and Hybrids equipped with lithium-ion batteries that degrade over time through charge and discharge cycles. This degradation might require a battery replacement, possibly occurring as early as the first 7 years. The second reason why many of these state-of-the-art electric and hybrid vehicles might not retain desirability in the used market as they do when new, is linked to obsolescence. The rapid release of newer models featuring more advanced technology and features may result in older EVs being perceived as outdated prematurely. This is particularly prevalent among buyers who favor the latest and greatest technology, striving to maximize their budget to ensure they acquire the most cutting-edge features their money can buy.

The third category of vehicles that experience excessive depreciation within the first 5 years are some mid-range Domestic and Foreign models that exhibit higher than average ownership costs. This is mainly influenced by vehicle reliability and repair costs. Perceived reliability, brand reputation and market demand are very important factors that play significant roles in determining the vehicles desirability and resale value on the used car market.

We have identified the top vehicles within each category.

Luxury Cars

The top Luxury vehicle to stay away from if you are concerned about reliability and resale value is the new BMW 7 Series. While newer models boast impressive technology and luxurious cabin finishes, their steep initial costs and intense competition contribute to a swift decline in resale prices.

Electric and Hybrid Cars

The Tesla Model S Has the highest reported 5-Year depreciation among electric cars.

It is a bit strange to crown the Model S as the highest depreciating electric vehicle on the market especially as the Tesla Model 3 demonstrates the highest resale value retention.

The Tesla Model S faces a comparatively high depreciation rate due to several factors. One significant aspect is the rapid evolution of electric vehicle (EV) technology. As newer and more advanced EV models are introduced to the market, the Model S, despite being a groundbreaking vehicle at its launch, may be perceived as relatively outdated. Additionally, concerns about its battery life and the potentially higher replacement costs can impact the resale value. The luxury sedan segment is highly competitive and as newer luxury models with cutting-edge features enter the market the Model S faces strong competition, influencing its depreciation rate.

Due to the limited number of fully electric vehicles available on the used car market for durations of five years or more, the current sample size for full electric vehicles is inadequate to forecast reliability and cost of ownership beyond the 5-year threshold.

Our pick for the top spot for the highest deprecation hybrid vehicle goes to the Chrysler Pacifica Hybrid. The Chrysler Pacifica Hybrid faces a notable and accelerated depreciation compared to other hybrid vehicles, primarily attributed to concerns related to reliability and maintenance issues. Owners often report higher frequencies of visits to the shop or dealership for diagnostics, which can be indicative of underlying problems affecting the vehicle's performance. The Pacifica Hybrid unfortunately, has gained a reputation for experiencing various electric and premature transmission issues contributing significantly to its depreciation. The intricate and integrated nature of hybrid systems, particularly involving the battery, poses challenges that may lead to higher repair costs. The perceived susceptibility to these issues has an adverse impact on the resale value of the Pacifica Hybrid, making it less appealing to potential buyers concerned about long-term ownership costs and dependability greatly effecting its 5-year depreciation rate.

Mid-range Domestic and foreign models

Our top pick for this category is Ford Explorer and the Fiat 500X.

The Ford Explorer's relatively high depreciation can be attributed to several factors, including a competitive market segment that sees frequent model updates. As newer SUV models with advanced features enter the market, older Explorer models may experience a more rapid decline in value. Additionally, concerns about reliability and potential mechanical and electrical issues coupled with changes in consumer preferences can contribute to the Explorer's higher depreciation rate.

The Fiat 500X is known for its higher depreciation rate compared to many other cars and this can be attributed to several factors. One significant aspect is concerns related to reliability and ongoing maintenance costs, impacting its long-term value. Also, the smaller vehicle size possess limited appeal in the US market, as American consumer preferences often lean towards larger vehicles. Coupled with the Fiat 500’s high repair cost and reliability issues the perceived resale value may also influenced Fiat’s significantly smaller market presence in the US.

Vehicle with high depreciating rates in the USA often share common characteristics such as luxury branding, specific models from various brands, and certain types of alternative fuel vehicles. Being aware of these trends empowers consumers to make informed choices, taking into account both their immediate preferences and the long-term financial implications of vehicle ownership.