Car Depreciation Calculator
Use this calculator to determine the future value of a car or vehicle based on its initial cost and length of use. Calculate the car’s depreciation over a specified number of years.
Using the Car Depreciation calculator
To use this calculator, input the car’s purchase price and its age at the time of purchase (e.g. 0 for brand new, 1 for 1-year-old). If you do not specify a “Depreciation Period,” the calculator will default to displaying depreciation over the next 8 years. If you know when you plan to sell the car, enter that number in the “Depreciation Period” field to see the car’s value after that time, the percentage and dollar value of the loss, and the average annual loss.
As you can observe, most cars experience the greatest depreciation in value during the first year after purchase, followed by a slower rate of depreciation until they reach around 10 years old. After that, the rate of value loss slows down even further. Keep in mind that the calculator’s numbers are based on industry averages and should be used for reference only. The actual depreciation of your car may vary depending on factors such as maintenance level, miles driven, market conditions, and fuel prices. Additionally, the same vehicle may depreciate at different rates in different markets; for example, a car may depreciate faster in the US, where average mileage is higher, compared to the UK, where it is typically lower.
Basics of car value depreciation
Depreciation refers to the decline in value of a car over time, usually when the owner plans to replace it with a newer model. As soon as a car is bought, it begins to depreciate, often losing as much as 10% of its value immediately. During the first year of ownership, the car’s value drops drastically, typically by 15-30%. From then on, the rate of depreciation slows down each year, as the vehicle accumulates mileage and experiences wear and tear, while newer cars enter the market. Depreciation tends to slow down around 9-10 years into the car’s life.
The rate of depreciation can be influenced by factors under the control of the owner, such as good maintenance and low usage on well-maintained roads. However, external conditions such as market changes, shifting consumer preferences, and increasing regulatory requirements also play a role. Therefore, it is important to consider whether to buy a brand new car that is likely to depreciate quickly in the first few years, or to purchase a used car that will depreciate at a slower rate. Depreciation only becomes a concern if you plan on selling the car and buying a replacement. If you intend to keep the car for many years, then depreciation is less of an issue.
Car depreciation example
When purchasing a car, the decision of whether to buy a brand new or a 4-year-old used car must be made, assuming the car will be replaced after 5-6 years in either scenario. All types of costs such as maintenance, insurance, and so on, as well as benefits like improved safety, fuel efficiency, etc. should be taken into account. However, even after accounting for these, the issue of car depreciation remains, as the manufacturing year of a vehicle is typically the main factor determining its sale price.
Assuming that a new car of a chosen manufacturer and model costs $56,000, and a 4-year-old used one costs on average $38,000, the graph above can be used to determine that the rate of depreciation for this model is on the lower end (32% decrease in 4 years). To compare the choice between new and used based on the combined yearly cost, a table like this can be created:
| Type / Variable | Depreciation / year | Maintenance / year | Total cost / year |
|---|---|---|---|
| Brand new | $4,806 | $1,500 | $6,306 |
| 4 years old | $2,785 | $2,000 | $4,786 |
It’s important to note that the numbers provided for depreciation, maintenance, and total cost per year are averages and in actuality, maintenance expenses will increase while depreciation decreases each year. The depreciation per year was calculated using a vehicle depreciation calculator and would only be an approximate result in a real-world scenario.
If we assume that the maintenance numbers include all expenses for keeping the car in good condition and paying necessary insurance, the total yearly cost numbers show that the luxury of having a brand new car will end up costing approximately $1,500 more per year, on average, compared to the second-hand option. $1,000 of that difference is due to the higher rate of depreciation. Additionally, a larger initial payment will be required for the new car. The decision of which option to go for ultimately depends on personal financial means and circumstances, but understanding the cost of that decision can help make it more informed.