How to use the car depreciation calculator
- Pick what you want: estimate future value from depreciation rates, or find the rate from what your car is worth now.
- For an estimate, enter the purchase price, the first-year and later-year depreciation percentages, the method and the number of years to show.
- For the rate, enter the purchase price, the value today and the years owned, then choose how many years to project.
- Read the estimated value, the total and average loss, and the year-by-year table. CSV and PDF downloads are available.
Formula
Declining method: value after year 1 = price x (1 - first-year %); later years = previous value x (1 - later-year %)
Straight-line method: each year loses a share of the purchase price, never below $0
Implied rate = 1 - (value today / purchase price)^(1 / years owned)
Total depreciation = purchase price - value at the end of the period
Depreciation is the loss in what a car could sell for. A constant percentage of the current value, the declining method, loses the most dollars in the first years, which matches how most cars behave.
Worked examples
Estimate: a $35,000 car that loses 20% in year 1 and 12% of its current value each later year is worth $28,000, $24,640, $21,683.20, $19,081.22 and $16,791.47 after five years. That is $18,208.53 lost, 52% of the price, with $7,000 gone in the first year and about $3,641.71 per year on average.
Straight line: taking 20% of the price in year 1 and 12% in each later year leaves $28,000, $23,800, $19,600, $15,400 and $11,200 after five years. A high percentage can reach $0 earlier, and the value stops there.
Finding the rate: a $35,000 car worth $24,500 after 3 years has lost 1 - 0.7^(1/3) = 11.21% a year. Keeping that rate, it would be worth $21,753.65 after 4 years and $19,315.15 after 5.
Why cars lose the most value early
A new car typically loses a large share of its value in the first year or two and then declines more slowly. That is why the calculator has separate first-year and later-year percentages. The illustrative defaults of 20% and 12% are not market data. Real rates depend on the make and model, mileage, condition, color, market conditions and incentives, so use your own research, appraisals or listings to choose them.
Using the rate from your own car
If you already know what a similar car sells for today, the second mode turns that into a yearly rate. That rate is an average over the years you owned it, so it blends the steep first year with the gentler later years. Use the projection as a rough guide only. It is most helpful for comparing models: apply each one's rate over the same number of years and look at the dollars lost.
How depreciation connects to costs
Depreciation is often the biggest cost of owning a newer car, larger than fuel or maintenance in the first years, and it is a loss that only becomes real when you sell. It also drives lease payments, because a lease pays for the depreciation during the term; try the car lease calculator. If you finance, the loan balance can stay above the car's value for a time. See the full cost of a loan with the car payment calculator, and use the car affordability calculator to set a price that fits your budget. To compare two values as a percentage, the percent change calculator is handy.
Assumptions and limits
- Rates are the percentages you enter and stay constant in each phase. Real value changes are not smooth.
- The default percentages are illustrative values, not market data, and not tied to any make or model.
- The declining method takes a percent of the current value each year. Straight-line takes a percent of the original price and stops at $0.
- In rate-finding mode the same rate is applied from the purchase price in every year of the table, so year 3 matches the value you entered.
- Mileage, condition, accidents, market swings, incentives, taxes and fees are not modeled.
- This is an estimate, not an appraisal or financial advice.
Frequently asked questions
How fast does a car depreciate?
It varies widely by model and market, and there is no single rate. Many cars lose the most in the first year or two. Enter first-year and later-year rates that reflect your research, then compare the year-by-year table.
How do I calculate what my car is worth after 5 years?
Take the purchase price and multiply by one minus the first-year rate, then by one minus the later-year rate for each remaining year. With 20% then 12%, a $35,000 car comes to $16,791.47 after 5 years.
What is the difference between the two methods?
The declining method takes a percent of the current value, so dollar losses shrink each year. Straight-line takes the same share of the original price each year, so dollar losses stay level until the value reaches zero.
Can I work out the depreciation rate from a car I own?
Yes. Choose the rate option, enter the purchase price, today's value and the years owned. A $35,000 car now worth $24,500 after 3 years has lost about 11.21% a year on average.
Is depreciation a cash cost?
Not until you sell or trade in the car. It is a loss of value rather than a payment, but it counts in the true cost of owning a car and it affects how much you can get toward the next one.