For most Americans, the most expensive thing you own that goes down in value is your car. How fast do they go down in value? Look at the Blue Book Values from KBB for a Ford Fusion S.
| Model year | Blue book (assuming 10,000 miles per year, dealership price) | Percent drop from new |
| 2019 Ford Fusion S (new) | $22,206 | N/A |
| 2018 Ford Fusion S | $16,332 | 26% |
| 2017 Ford Fusion S | $14,589 | 34% |
| 2016 Ford Fusion S | $12,830 | 42% |
| 2015 Ford Fusion S | $12,538 | 43% |
| 2014 Ford Fusion S | $11,390 | 48% |
| 2013 Ford Fusion S | $9,676 | 56% |
| 2012 Ford Fusion S | $7,420 | 66% |
| 2011 Ford Fusion S | $6,855 | 69% |
| 2010 Ford Fusion S | $6,085 | 72% |
| 2009 Ford Fusion S | $5,228 | 76% |
| 2008 Ford Fusion S | $4,253 | 80% |
| 2007 Ford Fusion S | $4,074 | 81% |
| 2006 Ford Fusion S | $3,651 | 83% |
So, first, let’s look at that first-year depreciation alone. It’s $5874. That’s $16 each and every day just in depreciation. That’s $.58 per mile in depreciation if you drive 10,000 miles in a year. For that car, you’d be paying around $0.10 per mile in gas. So, imagine paying seven times what you’re currently paying for gasoline, and that’s how you should feel when you combine the cost of depreciation and gas. (So, that $45 tank of gas suddenly costs $315. Ouch.)
On the other hand, if you have a car from the mid 90’s, it’s probably at the end of its useful life, and probably requires constant repairs to keep it running. So, unless you really handy or happened to get a really good car, a beater that’s that old is probably not worth the trouble unless it’s the only thing you can buy in cash now.
So, let’s look at some statistics. Thankfully, the State of New York has an excellent database of all their vehicle registrations [link]. I downloaded their database and did some basic analysis on it. In New York State there were 9,687,319 vehicles registered with a model year 1989 or newer (so, built in the last 30 years). I split this 10 equal-sized segments sorted from oldest to newest and looked at the average car in that segment. Similarly, I looked at US household incomes into 10 groups [link].
| Group | Average car age | Household income range |
| bottom 10% | 19 years | $0 – $14,280 |
| 10%-20% | 15 years | $14,280 – $24,913 |
| 20%-30% | 12 years | $24,913 – $35,494 |
| 30%-40% | 10 years | $35,494 – $48,002 |
| 40%-50% | 8 years | $48,002 – $61,822 |
| 50%-60% | 6 years | $61,822 – $78,567 |
| 60%-70% | 4 years | $78,567 – $98,823 |
| 70%-80% | 3 years | $98,823 – $127,144 |
| 80%-90% | 2 years | $127,144 – $178,793 |
| top 10% | 1 year | $178,793 + |
So, this table here is a description, not a prescription. So, first, it should be noted that these are two tables placed next to each other. I’m not saying that the average person in the 40%-50% income bracket buys on average an 8 year old car, but rather than a car in the 40%-50% age decile is 8 years old, and the 40%-50% income range is $48,002 – $61,822.
So, what do you think about the average American’s car? Are most people driving around cars they can afford just fine? Or are they driving around cars that are way too fancy and new? If you look at how broke most Americans are, and what percent of income goes to car payments, I think you could easily make a case that most Americans drive around cars that are completely unaffordable. So, here’s how I’d suggest using this table.
- Find your household income in the income ranges above
- Move 2 rows higher in the table (unless you’re already at the top)
- Use that car age as a starting point for your car search
So, let’s say your household makes $50,000/year. That means statistically you’re in the 40%-50% income bracket. Moving up two rows from there you get a 12 year old car. I’m writing this in 2019, so a 12 year old car is a model year 2007 car. According to the NY car registration data, some of the most common cars on still on the road from 2007 are the Toyota Camry, the Honda Accord, the Honda Odyssey, the Toyota RAV4, the Chevy Silverado, the Chevy Malibu, among others. Here are some prices from dealerships for those cars that I found while browsing the internet.
| Car | Price |
| 2007 Toyota Camry | $6588 |
| 2007 Honda Accord | $4999 |
| 2007 Honda Odyssey | $7488 |
| 2007 Toyota RAV4 | $7450 |
| 2007 Chevy Silverado | $9988 |
| 2007 Chevy Malibu | $3999 |
Bear in mind that this is really only a starting place for your car search. There may be various mitigating factors that push you in one direction or another. For example, you may simply not have the cash to buy a car in the age range from my suggested technique. Then don’t. If you don’t have the money to outright buy the car, do not buy it. Borrow a car; take public transit; ride a bike; buy a beater; rent a car; take Uber or Lyft; carpool. Do not go into debt, and certainly not to buy a car.
On the other hand, some cars drop in value very fast – particularly sedans and minivans – because of their low cool-factor. So, you might be able to afford a newer sedan or minivan. On the other hand, trucks and SUVs take a while longer to become super-affordable, so you might need to go a few years older to get a bargain. Also, some makes and models of cars are just cheaper. For example, I just saw an ad for a 2015 Nissan Versa for $6K from a dealership. That’s not a surprise given that the car only cost $13K new. On the other hand, if you’re looking for luxury, look older.
Bottom line: own your car, don’t let it own you. Unless you’re a teenage boy or have very immature friends, your peers really don’t care what car you drive. (And if you’re a teenage boy, you probably need the most conservative, boring car you can find. Insurance is nuts!) Depreciation is not your friend!