Used Cars: 100k-Mile Myth Busted
For consumers driving older SUVs who want to trade up, now could be the time to get top dollar on their current vehicles.
Once a newly-purchased car is driven off the lot, convention wisdom holds that the vehicle's value begins a descent that accelerates dramatically once the odometer crosses the six-figure mark.
But that long-held belief these days amounts to a myth, partly because of a tight supply of late-model used cars, according to a look at third-quarter sales by Edmunds.
The analysis shows vehicle values fell only incrementally between 100,000 and 150,000 miles, with the rate of depreciation much the same as the fall in value that happens between 50,000 and 100,000 miles.
“After about the first 40,000 miles, vehicles depreciate at a slow and steady pace. The most dramatic drop-off is actually during the first 20,000 miles," Ivan Drury, a senior analyst at Edmunds, said in a release. "The 100,000-mile myth is really just a psychological barrier that more and more car buyers are getting past."
Following the recession, many car owners had to keep their vehicles longer than they would have otherwise because they could not afford a new replacement, Drury said. "People then saw for themselves how much vehicle quality has improved and realized that a car with 125,000 or even 150,000 miles still has a lot of life left."
In the third quarter of this year, a 2013 model-year vehicle with between 10,000 and 20,000 miles on the odometer took, on average, the exact same amount of time to sell as one with between 90,000 and 100,000 miles. A 2010 model-year vehicle took an average of 34 days to sell in the third quarter, while a 2013 model-year vehicle took 42 days, and a 2016 model-year vehicle sat on the lot for an average of 51 days.
An oversupply of newer vehicles is welcome for buyers who can afford them, but there's still a large portion of the population who are looking for more affordable options to get around, "and those are becoming much harder to find," Drury noted.
Propelling used-vehicle prices higher is the popularity of SUVs and trucks, with a large gap between the value of passenger cars and those vehicles, Edmunds found. For example, a used 2015 midsize SUV with 100,000 miles still holds 50 percent of its original value, but a midsize car with 100,000 miles only retains 42 percent of its initial value. The gap further widens between older, low-mileage, used SUVs and passenger cars.
“If you’re someone who’s hanging on to an older SUV and thinking about trading up for a new vehicle, this could be a great time,” Drury said. "You’ll have the chance to take advantage of record-level new vehicle incentives and year-end savings, as well as get top-dollar for your current vehicle.”
The Edmunds findings differ from another look at used-vehicle values over the summer, yet both found the value of SUVs holding up better than smaller vehicles.