Car Depreciation

Depreciation is the cost of car ownership that never appears on an invoice — which is precisely why it’s so often underweighted in purchase decisions. For most luxury vehicles, it is also the largest single cost of ownership over a five-year holding period, exceeding financing, insurance, and maintenance combined. Understanding the depreciation curve before you buy is one of the highest-value financial decisions a car buyer can make.

The first year is typically the steepest. Most new luxury vehicles lose 15–25% of their value in year one. By year three, cumulative depreciation for mainstream luxury brands — BMW, Mercedes-Benz, Audi — often reaches 40–50%. By year five, 55–65% is common. A $80,000 vehicle held for five years can be worth $28,000–$36,000 at resale, representing $44,000–$52,000 in depreciation alone — roughly $700–$860 per month before any other cost is counted.

Brands and models vary significantly. Land Rover has historically shown some of the steepest depreciation curves in the luxury segment. Toyota’s Lexus brand and Porsche (particularly the 911 and SUV lines) consistently rank among the best at value retention. The full picture of which specific models hold value best lives in resale value, which approaches the question from the exit rather than the entry.

For buyers who want to minimize depreciation exposure, purchasing a certified pre-owned vehicle 2–3 years old shifts the steepest portion of the depreciation curve to the previous owner. That decision intersects directly with the buy vs. lease analysis, where the depreciation assumption is built into every lease payment. The Luxury Spending pillar covers how depreciation fits into the total cost picture alongside car ownership and auto insurance.