Edmunds: Car value myths, busted

You’ve probably heard over the years a number of tips or myths regarding the value of your car. They might involve how quickly a new vehicle depreciates, for instance, or the biggest factor that influences the value of your used vehicle. But are they true, especially this year because of new pandemic-related market trends? Edmunds’ experts analyzed the most popular car value myths to find the truth behind them.

MYTH: NEW CARS LOSE 20% THE MOMENT THEY DRIVE OFF THE LOT

True. “The first hit on the car is basically immediate,” said Richard Arca, director of vehicle valuations and analytics for Edmunds.

If you traded in your vehicle within a week or so, you’re losing the sales tax and fees you paid on the car — about 11%. Plus, the dealership will offer you less since the car is no longer new and it needs to make a profit on the sale. That will lead to a further drop of 8%-10%, Arca said.

Ultimately, the dealership will plan to sell it for around 4% less than what a new one would go for, he added.

On average, a new vehicle depreciates by 30.5% in its first year, 7.7% in the second and 6.8% in the third year, according to Edmunds data. This depreciation figure is an average among all brands, but as a general rule, luxury vehicles will depreciate faster, while vehicles with higher resale value (a Toyota Tacoma, for example) will be closer to 20% in the first year.

MYTH: MILES HAVE THE BIGGEST EFFECT ON TRADE-IN VALUE

False. The truth is there is no magic number. Mileage does play a role in a vehicle’s value, but not as much as you might think. As a general rule, the value of your vehicle will drop slightly with every 10,000 miles you add. But according to Edmunds data, there is no major drop-off at any certain milestone. Even the infamous 100,000-mile mark is...