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The "1-3-5" rule before buying a used car – what it meansBefore purchasing a pre-owned vehicle, drivers are advised to use the simple “1-3-5” rule, which helps assess how quickly the car will depreciate and how much the owner might lose upon resale.Sean Wright, a specialist in buying problematic cars, explains that depreciation is often one of the biggest car ownership expenses, yet many only consider it when selling or trading in their vehicle.
The essence of the rule
The “1-3-5 test” involves comparing listings for identical cars aged one, three, and five years. You should look for the same make, model, and trim level, as well as the closest possible mileage, condition, engine, transmission, and features.The expert recommends reviewing several listings for each age group and focusing on the average price, rather than the cheapest or most expensive options. This provides a more realistic picture of what people are actually asking for such vehicles.The largest price gap between one-year-old, three-year-old, and five-year-old cars indicates when the vehicle depreciates most rapidly. According to Wright, most models experience the steepest decline in the first three years, with the first year often showing the greatest loss – a new car can lose 15-35% of its value.If prices continue to drop significantly between three and five years, buyers should anticipate a lower resale value in the future. Conversely, if the rate of depreciation slows after three years, purchasing a car aged 3-5 years might be more advantageous, as a substantial portion of the value loss has already been “paid” by the previous owner.Wright cautions that a sharp price drop might signal buyer concerns about service costs, fuel, insurance, taxes, or repairs. A car might seem like a bargain due to its low price, but the actual cost of ownership can quickly erode that saving.Therefore, the “1-3-5 test” should be combined with checking the service history, warranty coverage, and projected running costs. The expert emphasizes that depreciation should be viewed as part of the purchase cost: a few minutes of analyzing prices for similar cars of different ages can help avoid buying a vehicle just before another sharp drop in its market value.