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Depreciation Bites Harder in October, Black Book Says

November 04, 2016

Photo of 2015-MY Chevrolet Colorado courtesy of GM.
Photo of 2015-MY Chevrolet Colorado courtesy of GM.

Depreciation for 1- to 5-year-old vehicles saw a significant increase to 2.9% for October from the 2.3% September rate with passenger cars seeing greater weakness, according to Black Book.

Cars saw a 3.2% decrease in retained value for the month, while trucks, vans, and SUVs saw a 2.6% depreciation rate. Vehicles from the 2011 to 2015 model years are now averaging an annual depreciation rate of 16.8%.

"We expect pockets of vehicles to see accelerated depreciation as the year comes to a close," said Anil Goyal, senior vice president of automotive valuation and analytics. "Most car segments certainly fall into this category, but we'll be paying special attention on those truck and utility segments that begin to show higher depreciation."

Compact cars saw the highest drop in value with a 3.6% decline to $8,393, which represents a 19.8% decline from a year ago. Vehicles in this category include the Honda Accord, Ford Focus, Toyota Corolla, Hyundai Elantra, Chevrolet Cruze, and the Nissan Sentra. Mid-size cars declined 3.2% to $11,730.

Subcompact SUVs also showed weakness with a 10.2% decline in the past three months. These vehicles include the Buick Encore and Chevrolet Trax.

Smaller pickups maintained their strength in retention value, falling 0.6% to $19,383, which represents an 8.1% decline from a year ago. Vehicles in this segment include the Toyota Tacoma, Nissan Frontier, Chevrolet Colorado, and Honda Ridgeline.

Categories with vehicles that are widely found in fleets or used for commercial purposes were mostly in line with the monthly trend, including full-size pickups (down 2.2% to $26,355), full-size vans (down 2.3% to $22,328, and compact vans (down 2.6% to $14,313). Year over year, vehicles in these categories depreciated 4.6%, 5.9%, and 8.3% respectively.

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Depreciation is simply the difference between the original cost of a fixed asset and the proceeds from the sale of the asset.

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