Car Depreciation Calculator
What a vehicle is worth after each year, on a declining balance rather than a straight line.
Last updated
Your details
Typically 15–20% after the first year.
The first year is steeper than the rest.
Result
- Value after 5 years
- $12,528.15
- Total depreciation
- $17,471.85
- Average a year
- $3,494.37
- Lost in year one alone
- $6,000.00
41.76% of what you paid
58.24% of the purchase price
20.00% — the steepest year by far
$30,000.00 losing 20.0% then 15.0% a year…
value = price × (1 − first) × (1 − rate)^(n − 1)
After year 1: $30,000.00 × 0.800 = $24,000.00
Then × 0.850 for 4 more years
$12,528.15
Formula — written step by step
30,000 car, 20% in year one then 15% a year…
value = price × (1 − first) × (1 − rate)^(n − 1)
After year 1: 30,000 × 0.80 = 24,000
Year 2: 24,000 × 0.85 = 20,400
Year 3: 20,400 × 0.85 = 17,340
Each year takes a share of a smaller number
12,528 after five years
Depreciation runs on a declining balance, not a straight line. Fifteen percent of 24,000 is 3,600; fifteen percent of 17,340 is 2,601. The loss shrinks every year, which is why the curve flattens rather than reaching zero.
A worked example
The cost of buying new against three years old
- New
- 30,000, kept 3 years
- Three years old
- bought at 17,340, kept 3 more years
- Rate
- 20% then 15%
- New: 30,000 → 17,340 over three years
- Depreciation = 12,660
- Used: 17,340 → 10,649 over three years
- Depreciation = 6,691
The used car costs about half as much to own
The same three years of driving, and 5,969 less lost to depreciation. This is the strongest financial argument for buying a car a few years old: the first owner has already absorbed the steepest part of the curve, and the second owner gets the flat part.
How to use this calculator
- Enter what you paid, including any fees rolled into the price.
- The first-year drop is set separately because it is always steeper — a new car loses value the moment it is registered.
- Typical rates are 15–20% a year after the first, but they vary widely by make, model and fuel type.
- Read the table to see where the curve flattens; that is the age at which buying becomes cheapest per year owned.
Why depreciation is not a straight line
A straight line loses the same amount every year and eventually reaches zero, which no car does. Vehicles lose a percentage of their remaining value, so the loss shrinks each year and the curve flattens without ever touching the axis.
The first year is the exception, and it is steep. A new car typically loses 15–25% almost immediately, partly because it is no longer new and partly because the retail price included costs a private seller cannot recover.
The case for buying used
Because the curve is steepest at the start, the first owner absorbs a disproportionate share of the total loss. Over the same three years of driving, a buyer of a three-year-old car typically loses a third of what the first owner lost.
The counterweight is that older cars need more maintenance and carry more risk of a large unexpected bill. The sweet spot for most buyers is a car two to four years old — past the steepest depreciation, still inside its reliable years, and often with some manufacturer warranty remaining.
What moves the rate
Depreciation varies far more by model than the smooth curve suggests. Vehicles with strong reputations for reliability hold value markedly better; premium models often depreciate fastest in absolute terms because they start high and their running costs deter second-hand buyers.
Mileage, condition, colour, service history and fuel type all matter, and the market can move under a whole category at once — as it has for diesels in cities with emissions restrictions. Treat the figure here as a planning estimate, and check a valuation guide before relying on it for a specific car.
Formula & methodology
What this calculator assumes
- Declining balance rather than straight line, because vehicles lose a percentage of their remaining value each year rather than a fixed sum. A straight line reaches zero; a declining balance never does, which matches reality.
- Rates are estimates you supply and are not drawn from any published table. Actual depreciation varies enormously by make, model, fuel type, mileage and condition, and a valuation guide for the specific vehicle is the only reliable source.
- Excludes running costs, finance interest, insurance and maintenance. Depreciation is usually the largest cost of owning a car but it is not the only one.
- Assumes normal mileage and condition. Damage history, high mileage or a model falling out of favour can depreciate far faster than any smooth curve.
Sources
- Kieso, Weygandt & Warfield, Intermediate Accounting, 18th edition, Wiley, 2022 — the declining-balance depreciation method.
Value remaining, at 20% then 15% a year
| Age | Share of price | On a 30,000 car |
|---|---|---|
| New | 100% | 30,000 |
| 1 year | 80.0% | 24,000 |
| 2 years | 68.0% | 20,400 |
| 3 years | 57.8% | 17,340 |
| 4 years | 49.1% | 14,739 |
| 5 years | 41.8% | 12,528 |
| 8 years | 25.6% | 7,694 |
| 10 years | 18.5% | 5,558 |
The first year alone costs 6,000 and the fifth costs 2,211. This is why depreciation per year owned falls steadily the longer a car is kept, and why the cheapest way to own a car is to keep it a long time.
Frequently asked questions
How much does a new car lose in the first year?
Typically 15–25%. The drop happens immediately on registration, because the car is no longer new and the retail price included costs a private seller cannot recover.
Why not use straight-line depreciation?
Because it reaches zero, and cars do not. A declining balance takes a percentage of what is left each year, so the loss shrinks and the curve flattens — which is what actually happens.
What depreciation rate should I use?
15–20% a year after the first is a reasonable default, but it varies widely. Check a valuation guide for the specific make and model where the number matters.
Is depreciation the biggest cost of running a car?
For a newer car, usually yes — often more than fuel, insurance and servicing combined. It is also the cost people notice least, because it is never invoiced.
Value at the end of each year
| Year | Value | Lost that year | Share of price left |
|---|---|---|---|
| 1 | $24,000.00 | $6,000.00 | 80.00% |
| 2 | $20,400.00 | $3,600.00 | 68.00% |
| 3 | $17,340.00 | $3,060.00 | 57.80% |
| 4 | $14,739.00 | $2,601.00 | 49.13% |
| 5 | $12,528.15 | $2,210.85 | 41.76% |