Depreciation is usually the biggest cost of owning a car, yet it never shows up on a bill. You only notice it when you sell or trade in. This calculator makes it visible: project a car’s value year by year from its purchase price, or reverse the math and find the yearly rate at which your own car has been losing value.
How to use the car depreciation calculator
- Choose Future value to project from a purchase price, or My car’s depreciation rate to analyze a car you already own.
- Enter the purchase price.
- For a projection, set the first-year depreciation and the rate for each later year. For your own car, enter its current market value and the years since purchase.
- Choose how many years to project, and optionally your miles per year to see depreciation per mile.
The depreciation formula
Cars lose a roughly constant percentage of their remaining value each year, not a constant dollar amount. That is declining-balance depreciation:
Here d1 is the first-year rate and d is the rate for every later year. Because each year’s loss is a percentage of a smaller balance, the dollar loss shrinks over time — the curve is steep at first and flattens out.
Worked example
A new car costs $35,000. Assume it loses 20% in the first year and 15% a year after that.
Year 1: 35,000 × 0.80 = $28,000
Year 2: 28,000 × 0.85 = $23,800
Year 3: 23,800 × 0.85 = $20,230 (57.8% of the price)
Year 8: 28,000 × 0.857 = $8,976.16
After eight years the car has lost $26,023.84, or 74.4% of its price. Driving 12,000 miles a year, that works out to about $0.27 per mile in depreciation alone.
Now reverse it: if you paid $35,000 and the car is worth $24,000 three years later, your car has depreciated at 1 − (24,000 ÷ 35,000)1/3 = 11.82% a year — gentler than the default assumption. At that pace it would be worth about $12,797 five years from now.
What drives depreciation
| Factor | Effect on resale value |
|---|---|
| Mileage well above about 12,000–15,000 a year | Lower — buyers price in wear and remaining life |
| Strong reliability reputation | Higher — demand stays firm in the used market |
| Accident or salvage history | Much lower, even after good repairs |
| Popular body style (trucks, SUVs) | Usually higher than comparable sedans |
| Rapid technology change (some EVs) | Lower — newer models make older ones less attractive |
| Color, options and condition | Modest but real differences at trade-in time |
Using depreciation in decisions
- Buying slightly used lets someone else absorb the first-year drop. Set the first-year rate to the later-year rate to model a two- or three-year-old car.
- Leasing is essentially paying for depreciation in installments; the residual value on a lease is the leasing company’s depreciation forecast. Compare both routes with the lease vs. buy calculator.
- Owing more than the car is worth happens when the loan balance falls more slowly than the value. The car loan calculator shows how term length affects that.
- For business assets with formal schedules — straight-line, double declining balance and others — use the general depreciation calculator.
These are planning estimates, not appraisals or financial advice. A dealer offer or private-sale listing for your exact car is the best measure of its current value.
Frequently asked questions
How fast does a new car depreciate?
The largest drop usually comes in the first year, often somewhere around 15% to 25% of the price, followed by smaller losses of roughly 10% to 20% of the remaining value each year. Trucks and some brands hold value better; luxury sedans and many electric models have lost value faster. Treat the defaults as a starting point and adjust them.
How do I calculate my car's depreciation rate?
Divide today's value by the price you paid, raise the result to the power of 1 ÷ years owned, and subtract it from 1. A $35,000 car worth $24,000 after three years has depreciated at 1 − (24,000 ÷ 35,000)^(1/3) ≈ 11.8% a year.
Why does a car lose value faster in the first year?
The first buyer pays for a car that has never been titled, comes with a full factory warranty and carries no history. Once it is registered and driven, it competes with nearly new used cars that buyers expect to discount, so a big part of the premium disappears immediately.
Is car depreciation tax deductible?
For a personal car, no. If you use a vehicle for business you may deduct depreciation on the business-use share, or use the IRS standard mileage rate, which already includes a depreciation component. Business vehicle depreciation follows MACRS rules and annual luxury-auto limits, which this calculator does not model.