Every car loses value the moment it's driven off the lot, but the rate of that loss changes dramatically over a vehicle's life. Understanding the general shape of the depreciation curve helps explain why a two-year-old car and an eight-year-old car of the same original price can be worth such different fractions of what they cost new.
Year one: the steepest drop
New cars typically lose the largest chunk of their value in the first twelve months — commonly cited estimates put this around 20%. Part of this is genuinely about wear and mileage, but a lot of it is about the buyer's perception: a "new" car becomes a "used" car the instant it's registered, and used-car buyers expect a used-car price even if the vehicle is functionally identical to one on the new-car lot.
Years two through five: steady decline
After the first year, depreciation tends to settle into a more predictable pattern — often in the range of 15% of the remaining value per year through roughly year five. This is the stretch where mileage, condition, and maintenance history start to matter more than the model year alone, because most cars in this age range are mechanically similar; what varies is how well each individual one was cared for.
Year six and beyond: the curve flattens
Older vehicles depreciate more slowly in percentage terms, partly because there's less value left to lose and partly because the buyer pool shifts — someone shopping for a ten-year-old car is often comparing it to other ten-year-old cars, not to a new one. At this stage, a well-maintained older vehicle can actually hold its value better, relatively speaking, than a neglected car half its age.
Why model year isn't the whole story
Model year is a useful shorthand, but it's really standing in for a bundle of other things: expected mileage, remaining warranty, styling changes, and safety-feature generations. Two vehicles with the same model year can still be worth different amounts once you factor in mileage, condition, and how well the vehicle was maintained — which is exactly why those get separate weight in most valuation approaches, including our own estimator.