Depreciation is often the silent factor that most car buyers don’t consider until it’s time to sell. Sellers are often uncertain about the value after car ownership, owing to this daunting term. In India, depreciation kicks in the moment your new car rolls out of the dealership. On average, a new car loses 20-30% of its value within the first year. From the second year onwards, the value continues to decline at around 10-20% annually. By the time a car completes five years, it typically retains just 50-60% of its original value. That’s a huge drop, and that is where body type matters. Whether you own a hatchback, sedan, SUV, or MPV, the rate of depreciation varies quite a bit depending on the segment, popularity, usage, and resale demand.Depreciation by Body Type Let’s start with hatchbacks: These compact cars actually retain their value quite well. A hatchback typically retains around 75-76% of its value after the first year, and about 60% even after five years of use. That makes them the slowest depreciating category in India, especially for owners who keep their vehicles for longer durations. Reasons? Affordable price tags, high demand in both new and used markets, and lower maintenance costs. Let’s take a look at SUVs: These have rapidly gained ground in India, and that is reflected in their depreciation curves as well. A well-maintained SUV retains approximately 75% of its value in the first year. For the next two years, the drop remains mild, thanks to their strong desirability, road presence, and increasing demand. However, once the SUV crosses the three-year mark, depreciation begins to accelerate. By year five, an SUV typically holds about 55-60% of its original value, slightly below hatchbacks, but significantly better than sedans. Even after 5 years, a used SUV’s valuation is significantly higher than that of a sedan of similar cost. Let’s explore MPVs: MPVs depreciate moderately: better than sedans, slightly higher than hatchbacks and SUVs. Their value retention is largely brand- and model-dependent. Well-known MPVs like the Toyota Innova or Maruti Ertiga tend to defy typical depreciation trends due to their reliability and strong used-market demand. If you want long-term utility and comfort, a used MPV is a smart, practical choice. Now to the Sedans: This segment, unfortunately, depreciates the fastest. While they do start on par with SUVs and hatchbacks in year one, sedans tend to lose traction in the used car market much quicker. By the second or third year, the resale demand weakens, pushing prices further down. By the time a sedan reaches five years of age, it retains just about 50-55% of its value. This drop is due to multiple reasons: a shift in consumer preference toward compact SUVs & less perceived versatility. When compared to used SUVs, used sedan valuations after a few years of ownership drop significantly. Sedans may seem like a depreciating asset, but they offer a sweet deal for second-hand buyers who can pick up a well-maintained example at a heavily discounted price.
