Demand slowing depreciation for used vehicles with over 100K miles

SANTA MONICA, Calif. - 

Despite popular belief, due to a tight supply of high demand late-model used-cars, not all vehicles that pass the 100,000-mile mark begin to dramatically drop in value. That's according to recent data from Edmunds.

Similar to the rate of depreciation that occurs between 50,000 and 100,000 miles, higher-mileage vehicles’ values are declining only incrementally between 100,000 and 150,000 miles, according to the Q3 Edmunds Used Vehicle Market Report.

“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,” Edmunds senior analyst Ivan Drury said in a news 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 people were forced to hang on to their vehicles longer than they may have wanted to simply because they couldn’t afford to get a new car. 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," he continued. 

In Q3, Edmunds found, on average, it takes the same amount of time to sell a 2013 model-year vehicle with between 10,000 and 20,000 miles, as it does a vehicle with between 90,000 and 100,000 miles.

Interestingly, higher-mileage vehicles are shown to be in high demand among car shoppers, according to the report.

“Even though the number of off-lease vehicles entering the used market is starting to level off, the average price of a used vehicle is still at a record high because demand also remains strong at the lower end of the market,” Drury explained.

“While the oversupply of newer vehicles is good news for buyers who can afford them, there’s still a very large segment of the population who just want an affordable vehicle to get them from A to B, and those are becoming much harder to find,” he went on to say.

In addition to creating a significant residual value gap between passenger cars and larger vehicles, the report shows that growing car shopper demand for SUVs and trucks has also contributed to the rise of used-vehicle prices.

While a used 2015 midsize SUV with 100,000 miles still holds 50 percent of its original value, a midsize car with 100,000 miles retains only 42 percent of its value, according to Edmunds data.

“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 added. “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.”

Keep an eye out for further insight and analysis from the Q3 Edmunds Used Vehicle Market Report in Wednsday's AR Today. 

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