Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Vehicle depreciation isn't a fixed universal percentage. It varies substantially by make, model, mileage and condition, so a single constant annual rate applied uniformly produces a rough range rather than a precise prediction for any specific vehicle's actual future value.
Before you rely on it
What to check
Use a range of plausible depreciation rates rather than a single fixed percentage, since the real rate varies meaningfully by the specific vehicle's make, model and condition.
The common error
Where people go wrong with auto depreciation calculator
Treating a single constant depreciation rate as a precise forecast for a specific vehicle. Actual depreciation varies enough by make, model, mileage and condition that a range, not one number, is the more honest way to use the projection.
Sensitivity evidence
How annual depreciation rate changes the estimated future value
| Annual depreciation rate | Estimated future value | Estimated depreciation |
|---|---|---|
| 11.0% | $22,336 | $17,664 |
| 13.0% | $19,937 | $20,063 |
| 15.0%worked example | $17,748 | $22,252 |
| 17.0% | $15,756 | $24,244 |
| 19.0% | $13,947 | $26,053 |
Every input, tested
Which input moves the estimated future value most
| Input | Tested from | To | Estimated future value at each end | Swing |
|---|---|---|---|---|
| Ownership period | 4.0 years | 6.0 years | $20,880 to $15,086 | $5,794 (33%) |
| Annual depreciation rate | 13.0% | 17.0% | $19,937 to $15,756 | $4,181 (24%) |
| Purchase price | $36,000 | $44,000 | $15,973 to $19,523 | $3,550 (20%) |
Two variables at once
Estimated future value by annual depreciation rate and purchase price
| Annual depreciation rate \ Purchase price | $32,000 | $40,000 | $48,000 |
|---|---|---|---|
| 11.0% | $17,869 | $22,336 | $26,803 |
| 13.0% | $15,949 | $19,937 | $23,924 |
| 15.0% | $14,199 | $17,748 | $21,298 |
| 17.0% | $12,605 | $15,756 | $18,907 |
| 19.0% | $11,158 | $13,947 | $16,737 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Purchase price | $40,000 |
| Annual depreciation rate | 15.0% |
| Ownership period | 5.0 years |
| Estimated future value | $17,748 |
| Estimated depreciation | $22,252 |
Where the inputs come from
Purchase price is what you paid, annual depreciation rate is the share of value the car loses each year, and ownership period is how many years you will keep it. New cars commonly lose 15% to 20% in the first year and 10% to 15% a year after, while some models hold value far better. The used-car market and independent valuation guides give value estimates for particular models, so check them before assuming a rate.
Using the estimated future value in a real decision
Use the result in a total cost comparison, and to see how your loan balance compares with the value.
When the result stops applying
Real depreciation is front-loaded, not steady, and varies by brand, mileage, condition and market conditions such as supply shortages. A constant rate is a simplification. Electric and specialty vehicles can depreciate faster or slower than average. The estimate does not include the effect of accidents or heavy use.
What to compare it with
Add depreciation to running costs on the vehicle total cost of ownership calculator, and check for negative equity on the auto negative equity page. The lease versus buy calculator uses resale value directly. A shorter loan or larger down payment keeps the loan below the car's value.
People also ask
Frequently asked questions
How fast do cars lose value?
New cars commonly lose 15% to 20% in the first year and around 60% over five years, though it varies by model.
Which cars hold their value best?
Trucks, certain SUVs and some sports and specialty models tend to depreciate slower, while luxury sedans and some electric models often lose value faster.
Is buying used a way to avoid depreciation?
It avoids the steepest part of the drop, since the first owner absorbs it, though a used car may need more maintenance.