Is keeping a vehicle longer always the best way to lower depreciation?

Not necessarily. While conventional wisdom suggests that extending a vehicle's service life reduces its net depreciation expense, our latest research shows that this isn’t always the case. We've expanded our study to evaluate more makes and models, analyzing their depreciation over 24, 36, and 48-month periods.

The results reveal that some vehicles experience minimal or even less depreciation over shorter cycles, making them ideal candidates for "short cycling." Particularly, minivans and smaller SUVs emerged as key contenders for this approach, where holding them for fewer months may actually yield greater financial benefits.

Study Parameters

We priced all models at invoice minus fleet incentives. We used Black Book, a used-vehicle guide, to determine residual values for each model at 24, 36, and 48 months. We assumed 2,000 miles a month and accumulated mileage of 48,000 at 24 months, 72,000 at 36 months, and 96,000 at 48 months. High mileage was deducted accordingly. Each model shows an estimated two-, three-, and four-year depreciation expense amount and average monthly net depreciation amounts at 24, 36, and 48 months.

Compact Sedans

Five of the six compact models reviewed achieved their lowest depreciation expense by retaining them for four years. These models depreciated at a fairly even slope from two to four years. The exception was the Hyundai Elantra GLS. Its average net depreciation at 24 months was $171, substantially lower than at 36 months ($198) and even lower than 48 months ($186).

Intermediate Sedans

The Hyundai Sonata GL is a good candidate for a two-year short cycling, with a monthly depreciation of $207 at 24 months, $228 at 36 months, and $212 at 48 months. Other models such as the Ford Taurus, Mercury Sable, Mitsubishi Galant DE, and Buick Century Custom also show relatively predictable depreciation over the 2-3 year range.

The Honda Accord LX is a contender for three- over four-year retention, with a depreciation of $233 a month at 24 months, leveling off at $200 for 36 and 48 months.

Full-Size Sedans

The Chevrolet Impala stands out in this category with lower depreciation expenses at two years versus three and four, at $225 at 24 months, $258 at 36 months, and $246 at 48 months. Other models in this category depreciate evenly.

Minivans

The Honda Odyssey LX emerges as a prime contender for short-cycling, with an average monthly depreciation of $80 over 24 months and 48,000 miles, increasing to $148 at 36 months, and $186 at 48 months. The Toyota Sienna CE, Chrysler Town & Country, Dodge Caravan SE, and Nissan Quest also show better depreciation at two years compared to four. The Nissan Quest and GMC Safari show marginal monthly depreciation increases from two to four years.

Pickup Trucks

The Toyota Tacoma is the only small/medium pickup with lower depreciation at 24 months than at 48 months. However, four of the five full-size pick-ups have lower depreciation expenses at 24 months compared to 48.

Mid-Size SUVs

Of 10 mid-size SUV models reviewed, eight achieved our lower 24-month depreciation expense. The Toyota Highlander has the distinction of achieving a Black Book-Clean value at 24 months that exceeds its original invoice cost. The Highlander enjoys a generous fleet incentive while holding a very strong residual value.

In reality you won’t find a two-year-old Highlander worth more than a new one. Yet the Black Book numbers—as well as other vehicle price guides—testify to this vehicle’s very good value.

It Pays to Study Depreciation

Studying any vehicle’s estimated depreciation expense pays off in two areas. First, certain models can be identified as being viable candidates for two- or three-year retention over four. Of the 52 models in the study, we found 21 that had a lower average monthly depreciation cost at 24 months. Six more models were a few dollars off. We’ve found the majority of the short-cycle candidates fall within the minivan, full-size pickup, and SUV categories.

Second, be it at 24-, 36- or 48-month cycles, there are considerable overall net depreciation expense differences between models. Vehicles that have lower monthly depreciation values earlier in their lifecycle don’t necessarily offer the best overall value—their values have simply declined more irregularly than the normal pattern.

To close we’ll repeat one of our mantras: It pays to analyze the total cost of ownership of a vehicle, not just the initial cost.