Thanks for your comment Edward.

In general, you’re right that depreciation isn’t constant across the first 5 years of a car’s life. However, for more reliable cars, the greater depreciation during year 1 isn’t as dramatic as people think.

I can’t count how many times I heard or read someone saying that a car loses 30% of its value as soon as you drive it off the dealer’s lot. That’s at least outdated, if it was ever true. If you look at the depreciation numbers for the three cars I covered, it’s 8.5% in year 1 for the CRV, 23% for the Soul, and 14% for the hybrid Camry and those depreciation fractions are after a full year.

If you can find the exact make and model car you want that’s 1 year old, has 12k or fewer miles on it, is in excellent condition, sells for the price you expect to pay given the greater first-year depreciation, etc.; and then drive it for 10 years, you will probably do a bit better than buying new.

Taking the hybrid Camry as an example, let’s say that instead of the $4824 depreciation of year 1 you only suffer $824 depreciation for year 11 (estimated based on depreciation numbers for years 8, 9, and 10, and set to make the math easier). You’d have saved $4000 over a decade of the car’s life assuming all else stays constant (which it may not). That’s about $33/month. Is that level of savings worth the extra time, effort, and limited availability? Possibly, but then again, maybe not.

As for buying after 2-3 years, at that point the depreciation math gets more even. The depreciation per year fraction for a 2-year-old car or a 3-year-old one are much closer to those of a 5-year-old car.