Almost nothing loses its value faster after being bought than an automobile. In fact, the average American car purchased in 2008 lost a third of its value by 2010, according to data compiled by consumer information site Edmunds.com. The reasons for that vary, but interestingly, the reason most people would expect cars to drop in value -- poor reliability leading to broken parts and expensive repairs -- is almost never the reason they actually depreciate so much.
According to an Edmunds representative, there are four main reasons a car will lose value more quickly than average: A discontinuation of the model; a generational overhaul rendering the old version obsolete; a significant improvement within the current generation of the car; and declining retail sales. Each has a bigger impact on depreciation than the mechanical reliability of the vehicle.
Every four to six years, most car models receive a complete overhaul, where the design and many essential parts are improved. Following an overhaul, cars from the previous generation, even ones just a year old, lose significant resale value. The Chrysler 300, which was awarded Motor Trend's Car of the Year in 2005, slowly declined in sales over the next five years. However, it wasn't until 2011, when the new generation was introduced, that the previous year's value declined sharply, by 40% in one year.
A car model doesn't even need a complete overhaul to make earlier versions less desirable. The 2011 Dodge Charger LX included a more powerful engine and a more modern transmission, and the 2010 Charger lost more than 37% of its value in that year.
On occasion, a model's used value may plummet just because other models in the same market are gaining popularity, lowering sales volume and used car prices. The Kia Optima, while performing quite well in reviews, was simply pushed out of a major share of the midsize economy car market by the popularity of cars like the Ford Fusion, Honda Civic and Toyota Prius.
Finally, a car can rapidly decline in value because of a complete discontinuation of the model. If a car is selling particularly badly, the manufacturer often scraps the line altogether and introduces something new in its place. In 2010, Cadillac said that in 2012 it will begin selling the XTS to the full-size luxury market. Its former attempts at that market, the DTS and the STS, have been discontinued. Their resale value plummeted more than 30% in 2010.
In order to identify the cars that lost the most value in the last year, we asked Edmunds to provide us with a list of cars sold new in 2010, their average retail price then, and their average price when sold used in 2011. In our quest to understand why the top -- or bottom -- 10 models lost so much value, we looked at reviews from organizations like Consumer Reports and J.D. Power and Associates. Consistently, these models performed well in J.D. Power's Predicted Reliability category, meaning the actual quality of the vehicle was not the issue. Instead, it was a matter of perception among car buyers that these cars had become obsolete or were otherwise unattractive.
Gallery: New cars that lose the most value
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