Final answer:
New cars typically depreciate around 20-30% in the first year and continue to depreciate at a rate of 15-18% annually for the next few years, often losing about 50% of their value by the end of the third year.
Step-by-step explanation:
Cars typically begin to depreciate the moment they are driven off the dealership lot. The rate of depreciation can vary based on the make and model, but on average, new cars can lose about 20-30% of their value in the first year. This depreciation continues over the years, with the vehicle losing 15-18% of its value annually for the next few years. By the end of the third year, a car may have lost around 50% of its initial value. However, this depreciation curve can flatten out, and the rate of loss decreases after the initial few years. When making a decision to buy a new or used vehicle, it is essential to consider the significant depreciation that occurs in the early years of car ownership, alongside costs such as maintenance, insurance, and loan interest rates.