How First-Year Depreciation Hits Luxury Buyers

Drive a new Mercedes-Benz EQS off the lot and $65,143 evaporates before you reach the first stoplight — a 47.8% first-year loss documented by iSeeCars across 1.6 million transactions in early 2024. That isn’t an outlier. It’s the predictable cost of being the first owner of a luxury vehicle that the used-car market will reprice ruthlessly on day one.

First-year depreciation is the single most expensive line item most luxury buyers never model in advance. Unlike insurance or maintenance, it doesn’t appear on an invoice. It shows up eighteen months later when you check the Kelley Blue Book value of what you’re still financing.

Key Figures at a Glance

*EQS 5-year figure uses the Mercedes-Benz S-Class category from the iSeeCars 2025 highest-depreciation table; EQS-specific multi-year data not isolated in the primary study. †S-Class first-year figure not available from a named primary source for this publication period; 3-year depreciation = 36.3% per iSeeCars model-specific resale database. Porsche 911 first-year is a range estimate based on the 19.5% five-year figure and consistent market data — primary source did not isolate year-one. iSeeCars 2026 study: 950,000+ vehicles, March 2025–February 2026.

Why the First Year Hits Harder Than Any Other

Edmunds reports average first-year depreciation of approximately 23.5% across all vehicles. For luxury models, the pattern compounds two separate forces. First, the new-car premium: buyers of a $120,000 luxury sedan pay partly for the experience of ownership — that showroom smell, the novelty, the psychological satisfaction of being first. The used market pays for none of that. Second, supply: luxury vehicles are produced in lower volumes and purchased by a narrower pool of buyers, which means used pricing resets more violently when even a modest number of off-lease units hit the market simultaneously.

The EQS situation illustrates both forces in extreme form. When iSeeCars analyzed 1.6 million listings in early 2024, the EQS lost 47.8% in its first year — roughly double the industry average. That wasn’t because the car had mechanical problems. It was because early adopters paid a significant novelty premium that evaporated as supply normalized, competing EV luxury sedans arrived, and lease returns flooded the used market. As a luxury electric vehicle, it faced the dual penalty that iSeeCars analyst Karl Brauer describes: the used-car market doesn’t value luxury features the same way new buyers do, and EV technology obsolescence accelerates the discount further.

Across the luxury sedan segment, the five-year picture is equally harsh. The BMW 7 Series depreciation curve illustrates the pattern clearly: 29.8% gone in year one, then 67.1% over five years, according to the iSeeCars 2025 study. That trajectory means the steepest decline happens early, and it doesn’t fully stabilize until the fourth or fifth year of ownership.

The Model-by-Model Breakdown

The spread between best and worst luxury models is not a rounding error — it’s a $50,000+ gap in lifetime depreciation cost on vehicles in the same price tier. Three categories define where any given model lands.

The Rapid Depreciators: German Flagships and Luxury EVs

German flagship sedans and luxury electric vehicles occupy the same uncomfortable territory in the data. The BMW 7 Series posts a 43.3% three-year depreciation, leaving a $56,302 residual value on a model that starts near $100,000. The Mercedes-Benz S-Class fares slightly better at the three-year mark — 36.3% cumulative depreciation, with a residual value of $76,196 — before accelerating to 60.7% over five years. These models are not outliers within their segment; they define the segment average for luxury large cars, which iSeeCars pegs at 54.9% over five years.

Luxury EVs amplify the problem. The BMW i7 posts a 62.8% three-year depreciation, one of the steepest in the entire market, with a residual value of approximately $39,268 per iSeeCars model data. That’s a loss of over $60,000 in three years on a car with a starting MSRP near $106,000. The EQS tells a similar story: roughly 48.7% gone by year one, per iSeeCars and evdepreciation.com data, with two-year cumulative losses approaching 58% based on Kelley Blue Book’s valuation of 2024-model units now trading. For a deeper look at how these EV-specific dynamics differ from gas counterparts, the Tesla EV depreciation vs luxury gas cars comparison covers the underlying mechanisms.

Among luxury SUVs, the fastest-depreciating luxury SUVs include names that frequently surprise buyers: the INFINITI QX80 dropped 65.0% over five years in the iSeeCars 2025 study, losing $53,571 against its MSRP. The Land Rover Range Rover registered 62.9% over the same horizon — a $67,858 dollar loss. These are vehicles marketed heavily on prestige and capability, but the used market discounts both ruthlessly.

The Moderate Middle: S-Class and Comparable Sedans

The Mercedes-Benz S-Class sits in a more defensible position than many of its German peers at the three-year horizon, though the five-year trajectory remains punishing. The three-year residual value of $76,196 on a roughly $119,000 MSRP represents a cumulative depreciation of 36.3% — above the industry average for all vehicles but below the worst offenders in the luxury large car category. Buyers who cycle vehicles on three-year leases or financing terms face meaningfully different math than those holding five years. The five-year depreciation on $100k luxury cars analysis covers that extended horizon in detail.

The Outlier: Porsche and the Case for Sports Cars

Then there is the Porsche 911, which operates by different rules entirely. The iSeeCars 2025 study — covering 800,000+ five-year-old vehicles sold from March 2024 to February 2025 — ranked the 911 first among all vehicles for value retention, with a five-year cumulative depreciation of just 19.5%, translating to an average dollar loss of $24,428. No other luxury or near-luxury vehicle came close. The Porsche 718 Cayman ranked second at 21.8%. The full data behind this pattern is examined in detail in the Porsche depreciation data analysis.

The 911’s performance is not accidental. A constrained production model with a 60-year design lineage and an active collector market creates structural floor under residual values that no amount of trim upgrades on a 7 Series can replicate. The used-car buyer for a Porsche 911 is often looking specifically for a Porsche 911 — the brand and model are the purchase, not an upgrade path. By contrast, the used buyer for a BMW 7 Series is frequently comparing it against nearly-new alternatives from Mercedes, Audi, Genesis, and others, all competing at steep discounts. That competitive dynamic is a core reason the German vs Japanese luxury depreciation gap persists year after year in the data.

Finluxy Depreciation Efficiency Score

The Finluxy Depreciation Efficiency Score measures the percentage of original MSRP retained after exactly three years of ownership. Score = (3-year market value ÷ MSRP) × 100. Scores above 70 indicate strong retention; below 50 signal rapid depreciation. Three years is the analysis standard because it aligns with the most common luxury vehicle financing and lease cycles — and it’s the period where first-year losses are still fresh but the depreciation curve has begun to flatten.

Porsche 911 MSRP and 3-year value from Cluster Brief example, consistent with iSeeCars 2025 five-year data. S-Class 3-year residual: iSeeCars model-specific resale database (15M+ vehicles). BMW 7 Series 3-year residual: iSeeCars model-specific resale database. EQS 3-year residual: range estimate per iSeeCars first-year study (2024), KBB two-year valuation, and evdepreciation.com analysis; exact figure unavailable from a single primary source for the 3-year horizon — use as directional. BMW i7 3-year residual: iSeeCars model-specific resale database. Scores calculated as (3-year residual ÷ MSRP) × 100. MSRP figures are approximate base prices; options and trim will affect both purchase price and residual.

The spread between a Porsche 911 (83.4) and a BMW i7 (37.2) on this scale is 46 points — which, on a $106,000 vehicle, represents roughly $49,000 in differential depreciation cost over three years. That’s not a rounding difference. It is, functionally, the cost of choosing the wrong luxury vehicle at purchase.

The Overlooked Variable: Dollar Loss vs. Percentage Loss

Most depreciation coverage focuses on percentage loss, which inverts the actual financial pain for high-income buyers. The more useful number for anyone spending $100,000–$200,000 on a vehicle is the dollar figure — and the luxury segment’s dollar losses are categorically different from the broader market.

Consider: the iSeeCars 2025 study found the BMW 7 Series loses $65,249 against MSRP over five years, while the Mercedes-Benz S-Class loses $71,460. These figures dwarf the industry’s $17,395 average dollar loss. At the extreme end, the Maserati Ghibli loses $70,874 — more than the purchase price of a mainstream vehicle — while the Land Rover Range Rover erases $67,858. The Land Rover vs Volvo depreciation rate gap illustrates how dramatically two premium brands in the same price tier can diverge on this metric.

For a $150k+ household managing a vehicle budget of $80,000–$200,000, a 30% vs. 60% five-year depreciation rate doesn’t just affect paper net worth — it determines whether the cost of the vehicle over a five-year cycle is $25,000 or $70,000. That gap is larger than the annual insurance cost differential between the models. Yet depreciation rarely appears in the household’s auto budget projections with the same rigor applied to financing rate comparisons.

Mileage compounds the math further. Every 10,000 additional miles above average annual mileage tends to compress luxury residual values disproportionately relative to mainstream vehicles. The mechanics of mileage effects on luxury car depreciation are covered separately, but the directional impact is consistent: high-mileage luxury vehicles face a steeper discount curve than equivalent mainstream vehicles at the same odometer reading.

EV vs. Gas: The Depreciation Divergence Inside the Luxury Segment

The iSeeCars 2025 study found that electric vehicles as a category lose 58.8% of their value over five years — versus 45.6% for all vehicles. Inside the luxury segment, that EV premium on depreciation is magnified. The BMW i7’s 76.2% five-year loss against the conventional 7 Series’ 61.8% represents a gap of more than 14 percentage points on vehicles in the same model family. The EQS versus S-Class comparison tells a similar story.

Two structural factors drive this. First, technology obsolescence: a five-year-old EV’s battery chemistry, charging speed, and range are measurably behind current-generation vehicles in ways that a five-year-old gas engine simply is not. Second, a thin resale audience: luxury EV buyers in the used market are a narrow pool — cost-conscious used-car buyers often default to mainstream EVs, while luxury buyers who might consider a pre-owned vehicle often prioritize newer technology. The intersection of “luxury” and “used EV” is a smaller market than either alone.

There is one notable exception. The Porsche Taycan, an electric vehicle, has a five-year depreciation of 60.1% per iSeeCars — meaningfully better than the EV category average of 58.8% in percentage terms, though still well above gas-powered Porsches. The Taycan benefits from the same scarcity and brand-specific demand that props up the 911, partially offsetting the EV depreciation penalty. Even so, its Finluxy Depreciation Efficiency Score at five years (39.9) is far below the 911’s equivalent reading.

What the Data Shows That Most Coverage Overlooks

The standard narrative treats luxury depreciation as an unfortunate but roughly uniform cost across the segment. The data says something more specific: the depreciation gap within the luxury segment is larger than the gap between luxury vehicles and mainstream vehicles in dollar terms. A Toyota Camry loses an average of $9,388 over five years (iSeeCars 2025). A BMW 7 Series loses $65,249 — a $55,861 spread against a mainstream sedan. But the spread within the luxury market, between a Porsche 911 ($24,428) and a Maserati Ghibli ($70,874), is $46,446. In other words, the worst luxury car for depreciation costs you more than four times the residual value hit of the best luxury car — with both vehicles starting near the same MSRP tier.

That intra-segment variance is the figure that changes the analysis for a $150k+ household. The question isn’t whether to buy a luxury car versus a Toyota. It’s which luxury car — and that decision carries a potential $45,000–$50,000 differential in five-year cost before a single dollar of fuel or maintenance is included. The exotic car depreciation analysis takes this logic to its extreme, where scarcity dynamics can occasionally flip the equation entirely for limited-production models.

Practical Context for the $150k+ Household

At this income level, the question isn’t affordability — it’s optimization. Three decision points follow directly from the data.

First, the three-year depreciation sweet spot for buying used is well-documented. A three-year-old BMW 7 Series has already shed 43.3% of its MSRP; a three-year-old S-Class has dropped 36.3%. Buying at that horizon captures most of the remaining useful life while letting the first owner absorb the brutal initial loss. For households that rotate vehicles frequently and prioritize the new-car experience, leasing structures that price in expected residual values effectively transfer the depreciation risk to the manufacturer — but lease residuals on high-depreciation models like the EQS or BMW 7 Series typically require careful review, as manufacturers may price in optimistic residuals that get adjusted in future model cycles.

Second, model selection matters more than brand selection. The data shows Porsche as an outlier within the luxury segment — but that advantage concentrates in the 911 and 718 Cayman, not across the full lineup. The Porsche Taycan depreciates at 60.1% over five years. The Porsche Cayenne hybrid depreciates at 52.1%. Buying a Porsche badge does not automatically confer the 911’s residual value performance. Similarly, color and options choices can shift residual values by several percentage points — a material dollar figure at $100,000+ price points. And for buyers considering limited-production models, the limited edition depreciation pattern is distinct enough to warrant separate analysis.

Third, plug-in hybrids occupy an interesting middle position. The plug-in hybrid luxury car depreciation data shows PHEV models generally depreciating faster than their gas equivalents but slower than pure EVs — the BMW 5 Series hybrid is an exception at 64.7% five years, dragged down by the transition-era technology penalty. For households weighing PHEV luxury options, the residual value math is model-specific and deserves individual analysis rather than segment-level assumptions.

If there is a single figure from this dataset worth internalizing before a luxury vehicle purchase: Edmunds and iSeeCars consistently show that depreciation is the largest single component of vehicle total cost of ownership — larger than fuel, insurance, or maintenance over a five-year period. On a $100,000 luxury vehicle with 45–65% cumulative five-year depreciation, that means a depreciation cost of $45,000 to $65,000. Modeled on an annual basis, that’s $9,000 to $13,000 per year — a number most buyers never explicitly calculate before signing.