High depreciating three-year-old cars provide bargains for used car shoppers

As an influx of off-lease vehicles is expected to enter the market this summer, a new study by car search engine iSeeCars.com reveals which 3-year-old used cars depreciate the most to present the best deals for consumers. While the average vehicle depreciates 39.1 percent after the average car lease term of three years, the highest-depreciating vehicles lose more than half of their value, resulting in significant savings for consumers opting to buy a 3-year-old vehicle instead of a new one.

iSeeCars.com analyzed more than 6.9 million car sales to identify models with the greatest loss in value after three years. “Three years is a popular age for used car buyers because the cars have taken a major depreciation hit, but likely have many of the latest modern safety and technology features,” said iSeeCars CEO Phong Ly. “ Some of these bargains provide good opportunities for car shoppers as reliable vehicles that are discounted because they simply aren’t as popular in their vehicle segments.”

Best Off-Lease Car Deals

iSeeCars identified the top 10 deals on off-lease cars, which all depreciated more than 1.3 times the 39.1 percent average for all vehicles.

The list is dominated by luxury sedans, which comprise eight of the 10 vehicles on the list. The two exceptions include the Ford Fusion Hybrid and the INFINITI QX60 SUV.

“Luxury vehicles are frequently leased, which creates a surplus of car inventory for these 3-year-old luxury vehicles in the used car marketplace,” said Ly. “Given the heightened demand for SUVs, luxury sedans are less popular and have to come down significantly in price to attract used car buyers.”

Earning the top spot is the Audi A6 midsize sedan, which loses 55.8 percent of its value after three years. It’s joined by a second Audi model, the A4 compact sedan. Both vehicles are praised for their driving performance and upscale interiors, making them attractive choices for those in the market for a luxury sedan.

Ranked second is the lone non-luxury car to make the list, the Ford Fusion Hybrid. A new Ford Fusion hybrid costs on average $3,500 more than its non-hybrid variant, but a used hybrid is actually cheaper than the gasoline version by over $1,000 showing that used car buyers don’t want to pay a premium for the hybrid drive type.

Two compact BMWs make the list including the third-ranked BMW 3 Series and the eighth-ranked BMW 4 Series. The BMW 4 Series used to be part of the 3 Series lineup until the automaker introduced the new model to give the coupe variant its own model. Both models are known for their performance and agile handling, and the 3 Series is one of the most popular small luxury cars of all time. A lightly used BMW 3 Series can be found for an average price of $22,718, while the more expensive used BMW 4 Series for sale costs an average $26,998.

The INFINITI QX60 stands out as the only SUV on the list. The INFINITI QX60 is among the more fuel-efficient vehicles in the midsize SUV class and provides a spacious third-row of seating for families. It’s not as popular as other midsize luxury SUVs, which could be a contributor to its depreciation.

Two additional luxury small cars make the list: the fourth-ranked Volvo S60 and the seventh-ranked INFINITI Q50. The Volvo S60 offers an elegant cabin and a suite of active safety features while the INFINITI Q50 offers a pleasant driving experience and powerful engine choices. Both cars fail to stand out in their very competitive segment, which help explain their steep drops in value.

Rounding out the list are two midsize luxury cars: the fifth-ranked Mercedes-Benz E-Class and the sixth-ranked Lincoln MKZ. The Mercedes-Benz E-Class is among the most highly-rated vehicles in its class thanks to its technology, opulent interior, drive quality, and engine options, but it is also among the most expensive. Meanwhile, the Lincoln MKZ is discontinued after the 2020 model year, which shows that demand isn’t high for this vehicle perhaps because it isn’t as luxurious as its competitors.

Best Off-Lease Cars for Sale Under $15,000

iSeeCars.com also examined the list of used cars for sale under $15,000 that present the best bargains to determine the most affordable off-lease used car bargains ideal for new drivers and graduates.

The list is dominated by sedans, with eight models, and also includes an SUV and a minivan.

Joining the top-ranked Ford Fusion Hybrid is its non-hybrid counterpart, the Ford Fusion midsize sedan. The Ford Fusion was discontinued after the 2020 model year, which shows there isn’t a high demand for this vehicle.

Two Kias make the list--the fourth-ranked Optima and the tenth-ranked Soul. The Kia Optima midsize sedan earned the highest safety designation of a Top Safety Pick+ from the Insurance Institute for Highway Safety (IIHS) and is a comfortable and practical sedan. The Kia Soul is a compact wagon that offers an abundance of cargo room making a used Kia Soul a practical SUV alternative for car buyers.

Three additional midsize sedans make the list including the third-ranked Volkswagen Passat, the fifth-ranked Nissan Altima, and the sixth-ranked Hyundai Sonata. A used Volkswagen Passat and a used Nissan Altima don’t offer as many standard features as their competition, but are both comfortable and capable vehicles. Meanwhile the Hyundai Sonata doesn’t have driving dynamics that are as impressive as other cars in its class, but it has a high-end interior and a great deal of standard driver assistance features.

The eighth-ranked Nissan Sentra and the ninth-ranked Hyundai Elantra represent the compact vehicles on the list. A used Nissan Sentra is a popular car for first-time car buyers due to its low price and above-average safety scores. The Hyundai Elantra has excellent fuel economy and an IIHS Top Safety Pick+ designation, and its no-frills interior makes a used Hyundai Elantra a practical choice for budget-minded drivers.

Rounding out the list is the lone SUV on the list, the seventh-ranked Chevrolet Trax subcompact SUV. A used Chevrolet Trax is an affordable option for consumers looking to enter the SUV market and has many active safety features and technology features.

Off-Lease SUV Bargains

iSeeCars.com also identified the top 10 SUVs with the steepest 3-year depreciation, which lose between 48 to 51 percent of their value.

Luxury vehicles account for the entire top 10 list of SUVs that depreciate the most with the top spot going to the INFINITI QX60, which also appeared on the overall top 10 list across all vehicle segments.

The second and third place vehicles are the midsize Mercedes-Benz GLE and the full-size Mercedes-Benz GLS respectively. Both vehicles are praised for their performance and upscale cabins, but they are dogged by their high ownership costs.

BMW accounts for the most vehicles on the list with three: the fourth-ranked X3 compact SUV, the sixth-ranked X1 subcompact SUV, and the seventh-ranked X5 midsize SUV. Each of these SUVs are among the highest-rated in their classes. BMW has one of the highest lease rates of all vehicle brands and these particular vehicles are among the most often leased, which means there are a lot in the used car marketplace with competitive pricing.

Two American luxury midsize SUVs make the list including the fifth-ranked Buick Enclave and the ninth-ranked Cadillac XT5. The Buick Enclave is a roomy three-row SUV with a higher-than-average price for the class, and since it was redesigned in 2018 there could be a lessened demand for lightly used Buick Enclave models. The Cadillac XT5 is a new model that was introduced in 2017 and isn’t as luxurious as other vehicles in its class, so its reduced price is likely a result of the lower demand for the vehicle.

Off-Lease Truck Bargains

The average 3-year depreciation for pickup trucks is 34.3 percent. iSeeCars found that five light duty full-size pickups depreciated at a higher-than-average rate.

The pickup truck that depreciates the most is the Nissan Titan, which depreciates at a 38.1 percent rate. The Nissan Titan full-size pickup is a capable truck, but it can’t tow as much as its competitors and doesn’t sell at as high a volume.

Ranked second is the Ram Pickup 1500. The Ram Pickup 1500 offers an upscale cabin that offers the comfort of a family vehicle with the capability of a work truck. Other trucks have higher towing capabilities and more safety features, which could affect its popularity.

The Chevrolet Silverado 1500 and the GMC Sierra 1500, which are from the same manufacturer and share the same platform, rank third and fourth. The GMC Sierra is the most expensive pickup truck on the list, and used car buyers likely don’t want to pay the premium for the high end materials that drive up its price. The Chevrolet Silverado 1500 has among the best towing capacity for the segment and a comfortable interior making a used Chevrolet Silverado 1500 for sale a good option for a family vehicle or a work hauler.

Rounding out the list is the Ford F-150. The Ford F-150 is the best-selling new and used pickup, so it depreciates close to average because they are in high demand, but there is also a high supply of used Ford F-150 trucks in the secondary marketplace.

Bargains on Off-Lease Sports Cars

The average 3-year depreciation for sports cars is 32.1 percent. iSeeCars expanded its analysis to look at vehicles sold in lower volume than the overall top 10 list to identify the top 10 sports cars with the highest 3-year depreciation.

The average new car price for the best sports car bargains ranges from the Ford Mustang at $41,438 to the Maserati Quattroporte at $125,309. These vehicles drastically depreciate because of their high starting prices, and buyers interested in these cars don’t want to pay a premium for used versions of these cars.

Bargains on Off-Lease Electric Vehicles

iSeeCars examined the depreciation of electric vehicles and found that the average for the segment is 52.0%, which is nearly 1.4 times greater than the average for all vehicles.

*Estimates of new car prices based on weighted average MSRP from distribution of used car trims

“Categorically, electric vehicles depreciate more than the average vehicle because resale values take into account the $7,500 federal tax credit and other state and local credits that were applied to these vehicles when they were bought new,” said Ly. “Because the technology of EVs changes at a rapid pace, obsolescence also plays a role in their dramatic depreciation as well as consumer range anxiety and lack of public charging infrastructure.” However, Tesla vehicles defy this trend and depreciate far less than the segment average.

The electric vehicles that depreciate more than the average rate are the BMW i3, the Nissan LEAF, and the Kia Soul EV. The average price of a new BMW i3 is $54,181, which is high for an electric car, especially a compact car that doesn’t provide a lot of space. Similarly, the small size of the LEAF and the fact that it underwent a major redesign in 2018 lowers the demand for the 2017 used version.

The three available Tesla vehicles currently in production with used car versions available all have below-average depreciation for the segment. One reason Teslas defy the high depreciation of the EV segment is because over-the-air software updates help keep even the older versions current. As such, consumers are likely willing to pay higher prices for the Model S and Model X than what they are willing to pay for other used luxury vehicles.

A lightly used Tesla Model 3 is the vehicle with the lowest depreciation overall, depreciating more than 5 times less than the average for the segment. “The Tesla Model 3 is still very much in high demand since it started production in 2017. Even though it doesn’t present a bargain compared to its new car price, it offers consumers a more affordable option for owning a Tesla.

Bargains on Off-Lease Hybrid and PHEVs

iSeeCars examined the depreciation of electric vehicles and found that the average for the segment is 40.9%.

The two hybrid vehicles that have the highest depreciation are luxury plug-ins: the first ranked Mercedes-Benz S-Class and the second-ranked BMW 3 Series. Hybrid vehicles are more expensive than their gasoline counterparts, and the depreciation is even steeper for hybrid luxury vehicles.

Best Brand Bargains

iSeeCars looked at which automakers offer the most 3-year bargains on their vehicles and found that 20 automakers had a higher 3-year depreciation than the overall average of 39.1 percent.

Luxury automakers comprise the top 10 positions on the list, with Lincoln earning the top spot. Luxury automaker Lincoln recently discontinued many models to make way for new vehicles in their lineup. The low demand for these vehicles contributes to the high depreciation for the brand.

Best Used Car Deals by City

iSeeCars analyzed the data geographically to see which lightly used vehicles had the most savings over their new versions in the top 50 most populous metropolitan areas.

Echoing national data, the model that depreciates the most is the Audi A6, which earned the distinction in 15 metro areas.

For consumers who are making a vehicle purchase, it is important to understand the types of cars that are available within their budget and to anticipate how long they plan on keeping the vehicle. “If you want to save money, purchasing a car that has already taken most of its depreciation hit is a smart economic decision,” said Ly. “Conversely, if you are purchasing a new vehicle and plan on turning it in after a few years, consumers might want to avoid the vehicles on this list.”

Consumers should also be wary of deals that are too good to be true, and should take measure beyond taking a test drive. “When going through the used car buying process, it’s always important to get a vehicle history report from the dealership such as Carfax or Autocheck and have the car inspected by an independent mechanic,” said Ly. “Online resources like the iSeeCars VIN Check report complements standard history reports to equip shoppers with all the data they need to decide if their vehicle purchase is a smart one.”

Methodology

iSeeCars.com analyzed more than 5.7 million new cars from model year 2017 sold between January and June 2017, and more than 1.2 million used cars from the same model year sold between January and June 2020. Prices from 2017 were inflation-adjusted to 2020 dollars, based on data from the US Bureau of Labor Statistics. The difference in average price for the same model across the two time periods was calculated as a percentage of the average price in 2017, adjusted statistically for sales volume and new car pricing. Heavy-duty vehicles, vehicles discontinued prior to the 2020 model year, and low-volume vehicles were excluded from further analysis, with the exception of sports cars and alternative-fuel vehicles, which were analyzed separately.

About iSeeCars.com

Methodology

iSeeCars.com analyzed more than 5.7 million new cars from model year 2017 sold between January and June 2017, and more than 1.2 million used cars from the same model year sold between January and June 2020. Prices from 2017 were inflation-adjusted to 2020 dollars, based on data from the US Bureau of Labor Statistics. The difference in average price for the same model across the two time periods was calculated as a percentage of the average price in 2017, adjusted statistically for sales volume and new car pricing. Heavy-duty vehicles, vehicles discontinued prior to the 2020 model year, and low-volume vehicles were excluded from further analysis, with the exception of sports cars and alternative-fuel vehicles, which were analyzed separately.

About iSeeCars.com

iSeeCars.com is a data-driven car search and research company that helps shoppers find the best car deals by providing key insights and valuable resources, including the iSeeCars VIN Check report and Best Cars Rankings. iSeeCars has saved users over $406 million so far by applying big data analytics powered by over 25 billion (and growing) data points and using proprietary algorithms to objectively analyze, score and rank millions of new cars and used cars.