Car Depreciation Calculator

Value after n years = purchase price × (1 − first year rate) × (1 − later years rate) ^ (n − 1), rounded to two decimals at the end of each year; first year depreciation = purchase price − value after year 1; total depreciation = purchase price − value after n years; value retained = value after n years ÷ purchase price × 100

Purchase price

What the car cost when it was new, or whatever figure you want the decline measured against. It is the starting point of the curve and the denominator of the share retained, so a price that already includes taxes and delivery charges gives a slightly different answer from the bare list price — both are defensible, but the same one has to be used on both sides of the comparison.

First year depreciation rate

The drop in the first year, as a percentage of the purchase price. It is a field of its own because the first year is not the same kind of year as the rest: a car becomes a used car the moment it leaves the lot, and that single step is usually the largest one the curve ever takes. Entering the same number here as below flattens the curve into a plain declining balance, which is a legitimate thing to model but a different one.

Later years depreciation rate

The drop in every year after the first, applied to the value at the start of that year rather than to the purchase price. Applying it to the original price would make the decline a straight line and would eventually take the value below zero, so this rate compounds on what is left. That is what makes the curve bend: each year takes a smaller amount away than the year before, even though the rate never changes.

Ownership years

How long the car is kept, counted in whole years. It sets how many times the later-years rate is applied, so it is the one field that changes the total without changing either rate. Fifteen years of a car is not five years of it three times over — the compounding is the whole reason the long holds end up worth so little.

Value after ownership

What the car is worth at the end of the period, printed to two decimals. This is the figure to compare against a trade-in offer or a private sale price, and it is the one number here that a buyer or a dealer would recognise as a price rather than as a statistic.

First year depreciation

The money lost in year one alone, which is usually the largest single year in the schedule and the number that surprises people most. On the default figures it is 6,000 of a 30,000 car, and the second year takes only 3,600 — the first year costs two thirds again as much as the one after it, which is the shape the two separate rates exist to express.

Total depreciation

The purchase price minus the value at the end, in money rather than in percent. At short holds it is nearly the same as the first year figure; at long holds it approaches the entire purchase price, because the curve never stops declining and never reaches a floor on its own.

Value retained

What is left as a share of what was paid, which is the form most useful for comparing cars of different prices. A 10,000 car and a 60,000 car that both retain 40 percent have followed the same curve, and reading the retained share rather than the money lost is what makes that visible.

Use it to put a number on a resale value you have been guessing at, to see what the first year of ownership costs before the rest, or to compare two cars whose prices and expected declines differ. It also answers the question a lease or a trade-in offer implies: if the offer is above the value the curve predicts, the offer is good relative to your own assumptions rather than relative to the market. Two warnings. The rates are assumptions you supply, so the output is only as good as they are, and the page will not tell you whether yours are realistic — if you want a figure grounded in observed prices rather than in your own belief about them, that has to come from a price guide or from listings. And this is market depreciation, not the depreciation on a set of books: a business writing a vehicle down for tax uses rules that prescribe the rate, force the value down to a chosen salvage figure, and have nothing to do with what the car would fetch. Using a tax schedule to predict a sale price, or this page to compute a deduction, will be wrong in both directions.

1. The default: a 30,000 car over five years

   1. Year 1: 30,000 × 0.80 = 24,000, so 6,000 is lost
   2. Year 2: 24,000 × 0.85 = 20,400
   3. Year 3: 20,400 × 0.85 = 17,340
   4. Year 4: 17,340 × 0.85 = 14,739
   5. Year 5: 14,739 × 0.85 = 12,528.15
   6. Total depreciation: 30,000 − 12,528.15 = 17,471.85
   7. Value retained: 12,528.15 ÷ 30,000 = 41.76 percent

   This is the whole page in one run. The first year takes 6,000 and the second takes 3,600, even though the car was worth less at the start of the second year — the rate fell from 20 percent to 15 percent and the base it applies to fell too, and the two effects compound. Five years on, a little over forty percent of the price is still there, and the money gone is more than half.

2. One year only: the cost of the first step

   1. Year 1: 30,000 × 0.80 = 24,000
   2. First year depreciation: 30,000 − 24,000 = 6,000
   3. The later-years rate is applied zero times, so total depreciation is the same 6,000
   4. Value retained: 24,000 ÷ 30,000 = 80 percent

   With a single year the later-years rate never fires, so first year depreciation and total depreciation are the same 6,000 and the retained share is exactly 80 percent. It is worth running once, because it isolates the largest single year of the schedule: whatever the rest of the curve does, this 6,000 happens first and happens in full.

3. The same rate in both fields: a flat 20 percent a year

   1. Year 1: 30,000 × 0.80 = 24,000
   2. Year 2: 24,000 × 0.80 = 19,200
   3. Year 3: 19,200 × 0.80 = 15,360
   4. Total depreciation: 30,000 − 15,360 = 14,640
   5. Value retained: 15,360 ÷ 30,000 = 51.20 percent

   Setting both fields to 20 percent gives 15,360 after three years, where the default 20-then-15 curve would give 17,340. The difference is entirely in years two and three, and it is the reason the two rates are separate fields: the default curve is not a 20 percent car, it is a 20 percent car that decelerates, and one number cannot say both.

4. A slow first year and a fast decline afterwards

   1. Year 1: 10,000 × 0.95 = 9,500, so 500 is lost
   2. Year 2: 9,500 × 0.75 = 7,125
   3. Total depreciation: 10,000 − 7,125 = 2,875
   4. Value retained: 7,125 ÷ 10,000 = 71.25 percent

   Nothing requires the first year to be the steep one, and a collector car, a limited run or a model with a waiting list can hold its price for a year and fall later. The page takes whichever shape you enter; what it will not do is tell you which shape is the true one. Note that the second year alone takes 2,375 — nearly five times the first.

5. A long hold: thirty years

   1. Year 1: 30,000 × 0.80 = 24,000
   2. Years 2 to 30: each year's opening value × 0.85, rounded to two decimals every year
   3. Year 30: 253.49 × 0.85 = 215.47
   4. Total depreciation: 30,000 − 215.47 = 29,784.53
   5. Value retained: 215.47 ÷ 30,000 = 0.72 percent

   Thirty years of the same curve leaves 215.47 of a 30,000 car — under one percent. The curve is exponential, so it keeps a positive value forever and never quite reaches zero; no year in the schedule takes the whole remaining amount, which is exactly what makes it different from a depreciation schedule that is required to land on a chosen salvage figure. Whatever a thirty-year-old car is actually worth is decided by collectors rather than by this arithmetic, and that is the honest limit of the model.

The rates are the entire input and the page has no opinion about them. It does not know the make, the model, the mileage, the service history or the region, and it has no price data behind it — so it cannot tell you that a particular car will lose a particular amount, only what follows if it does. Real values move for reasons no rate can hold: a redesign makes the previous model look old overnight, a fuel price spike hits one class of car and not another, a reliability reputation is earned or lost over years, and an accident or a missed service changes one car without changing the curve. Nor is the decline smooth in reality the way it is here — it steps at each sale, at each model year, and at each mileage milestone rather than sliding monthly. The curve also has a floor it cannot see. Cars do not become worthless at a fixed rate: below a certain value the decline flattens, because a running car has a scrap or parts value and because the bottom of the market is set by people who need any car rather than a good one. Thirty years of compounding will take a car far below that floor, so the long holds are the least reliable part of the page. Finally, nothing here accounts for what it costs to own the car — insurance, servicing, tyres, fuel and repairs are usually a larger number over five years than the depreciation itself, and none of them appear in any figure on the panel.

Why are there two depreciation rates instead of one?

Because the first year is not the same kind of year as the rest. A new car becomes a used car the first time it is registered, and that single step is usually the largest drop the curve ever takes; after it, the value keeps falling but by a percentage of a smaller number. One rate cannot express both without flattening the shape, and flattening it would make this page indistinguishable from a straight declining balance. If you genuinely believe the decline is flat, set both fields to the same number and the page will model exactly that.

Are the default rates based on real data?

No, and it is worth being blunt about it. Twenty percent in the first year and fifteen percent a year after is a commonly quoted shape and nothing more — it is a starting point you are expected to replace with the curve you actually believe. The page has no price data behind it and no knowledge of the vehicle. Real depreciation depends on the model, the mileage, the condition, the region and the market of the year, and two cars bought on the same day for the same money can be worth very different amounts five years later.

Is this the same as the depreciation a business deducts?

No, and the two should not be mixed. A business writing a car down for tax or for its accounts applies rates set by rules, and the resulting schedule is required to bring the value down to a chosen salvage figure by the end of a chosen life — so the last year is forced rather than calculated, and the rate is not an observation about the market. This page models what a car sells for, which is a market fact, and it has no salvage figure and no forced endpoint. Using a tax schedule to guess a resale price, or this page to compute a deduction, will be wrong in both directions.

Why does the value never reach zero?

Because each year takes a percentage of what is left rather than a fixed amount, so there is always a positive remainder however many years you run. That is a property of the arithmetic and not a claim about the world. In reality cars stop falling at some point, because a running car has a scrap value and a parts value, and the bottom of the market is set by buyers who need any car rather than a good one. For long holds the page therefore overstates the decline, and the further out you go the more it does so.

Should I use the price I paid or the list price?

Either, as long as both sides of the comparison use the same one and you are consistent about what was included. A drive-away price that already contains tax, registration and delivery charges is a real cost of ownership and a defensible starting point; the bare list price is what a price guide will quote. The difference is usually a few percent of the starting figure, which moves the value retained slightly but rarely changes the decision — whereas mixing the two across two cars you are comparing can easily invert the ranking.

How do I use this to judge a trade-in offer?

Enter the number of years you have kept the car and the rates you believe, and compare the value after ownership with the offer. An offer above the figure means the dealer is paying more than your own assumptions imply the car is worth, which usually means either your rates are too pessimistic or the dealer wants the sale badly enough to overpay on the trade. An offer well below it is the ordinary case, since a dealer has to resell at a profit and carries the cost of reconditioning. Neither outcome tells you which price is right — it tells you how the offer sits against your assumptions.

What is the value retained share for?

It is the same fact as the money lost, in the form that survives a change of price. A car that retains 40 percent of what was paid has followed the same curve as any other car that retains 40 percent, whatever the two cost, so the share is what you compare between a cheap car and an expensive one. The money figure is what you compare against a specific offer. The page prints both because they answer different questions, and neither is derived from the other by anything more than a division.

• Publication 946, How to Depreciate Property — the accounting and tax sense of the word depreciation, where the rate is prescribed by rules rather than observed in a market, which is the sense this page deliberately does not use — Internal Revenue Service (United States)
• Publication 551, Basis of Assets — how the starting figure for a car is worked out when it is used in a business, including the costs that are added to the purchase price rather than treated separately — Internal Revenue Service (United States)
• Publication 463, Travel, Gift, and Car Expenses — the actual costs of running a car and the standard mileage rate, which are the expenses a depreciation curve leaves out entirely — Internal Revenue Service (United States)