Sedans Are Rapidly Depreciating, And Here's Why

Study

The cause will probably not surprise anyone.

It wasn’t so long ago when sedans were among the best-selling auto segments in the US, alongside pickup trucks and traditional SUVs. And then came the crossover, the sedan-based body style that combines the look of a trendy SUV with car-like fuel economy. It was and remains a winning combination while sales of traditional sedans have declined so much that Ford has made the bold decision to discontinue them entirely in the US.

According to AAA’s annual Your Driving Costs study, America’s craving for crossovers is not only confirmed but is also causing sedans to depreciate in value at faster rates.

For example, in the past year alone sedan depreciation costs have increased up to 13 percent compared to last year. There is, however, one type of traditional car body style that’s holding up pretty well, those with hybrid or electric powertrains. These eco-friendly cars, like the Chevrolet Volt, Toyota Prius, and Tesla Model S have experienced decreased depreciation rates.

But what many don’t realize, regardless of what type of vehicle you buy, is that depreciation accounts for almost 40 percent of the cost of owning a new vehicle. Buyers need to bear in mind a vehicle’s resale value and not just the purchase price.

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In 2018, AAA’s study found that the average cost to own and operate a new vehicle came to $8,849 per year. Factors such as fuel costs, maintenance, repairs, insurance, registration fees, depreciation and loan interest were all taken into account. If you don’t intend to keep the new vehicle for long, it’s best to consider a lease. But if you do intend to buy, it’s best to keep the vehicle for a long time and properly maintain it or, alternatively, buy a certified pre-owned vehicle and do the same.

Remember, a new vehicle typically depreciates more than $3,000 per year. The numbers can be startling, especially when compared to a new vehicle’s price tag. So, which is the most affordable vehicle segment? Small sedans. Yes, really.

The study found the average cost for a small sedan, such as the Hyundai Elantra or Honda Civic, came to $6,777 annually. A hybrid costs an average $7,785, while small SUVs ring up to $7,869. Electric vehicles come next with an average of $8,384. Next, come medium-sized sedans, such as the Honda Accord, at $8,866. At the top of the range comes pickup trucks with an average annual cost of $10,215. Buy wisely.

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