Fuel, insurance and repairs are costs you notice every month. Depreciation is the cost you do not: the quiet drop in what the car is worth, which you only feel when you sell it or trade it in. For many new cars it is the biggest expense of ownership, larger than fuel and maintenance over the first few years. This car depreciation calculator projects a vehicle's value year by year with a transparent model, so you can compare cars, decide how long to keep one, and see what each year and each mile of ownership costs in lost value.
How to use the car depreciation calculator
- Enter the purchase price and how many years you have owned or plan to own the car (fractions of a year are fine).
- Pick a method. Declining balance uses a first-year percentage and a yearly percentage after that. Straight line uses a salvage value and a useful life.
- Enter your rates. Use figures for the specific model from a pricing guide or from listings of the same car at different ages; the defaults are placeholders.
- Add total miles if you want depreciation per mile.
Car depreciation formulas
Straight line: value(t) = P − (P − S) × t ÷ L, S = salvage value, L = useful life in years
Value lost = P − value(t); per year = lost ÷ t; per mile = lost ÷ miles
P is the purchase price, d₁ is the first-year rate, and d is the rate for each later year. The two methods answer different questions. Declining balance matches how most cars behave in the market, with the steepest loss early. Straight line is a bookkeeping convention that spreads the loss evenly.
Worked example
A $35,000 car loses 20% in its first year and 15% of the remaining value in each year after that. You keep it 5 years and drive 60,000 miles.
- After year 1: 35,000 × 0.80 = $28,000.
- After year 5: 28,000 × 0.854 = $14,616.17.
- Value lost: $20,383.83, which is 58.2% of the price.
- That is $4,076.77 a year, $339.73 a month, or $0.340 per mile.
Value of a $35,000 car by year
Declining balance with a first-year drop and a later yearly rate, computed with the formula above. The three columns show the first-year and later rates.
| Year | 20% then 10% | 20% then 15% | 25% then 15% |
|---|---|---|---|
| 0 | $35,000 | $35,000 | $35,000 |
| 1 | $28,000 | $28,000 | $26,250 |
| 2 | $25,200 | $23,800 | $22,312 |
| 3 | $22,680 | $20,230 | $18,966 |
| 4 | $20,412 | $17,195 | $16,121 |
| 5 | $18,371 | $14,616 | $13,703 |
| 6 | $16,534 | $12,424 | $11,647 |
| 7 | $14,880 | $10,560 | $9,900 |
| 8 | $13,392 | $8,976 | $8,415 |
| 9 | $12,053 | $7,630 | $7,153 |
| 10 | $10,848 | $6,485 | $6,080 |
Using the result
- Compare cars by cost of ownership. Two cars with the same price can cost very different amounts to own if one holds value better. Put the depreciation per year next to fuel and insurance in the car ownership cost calculator.
- Check loan balance against value. If the projected value falls below what you owe, you have negative equity; use the negative equity calculator to size the gap.
- Plan the sale. The yearly loss usually shrinks as the car ages, so the cost of keeping a car for one more year is the line “value one year later” subtracted from today's value.
- Remember what drives real values: mileage, condition, accident history, trim, color, fuel prices and the used-car market. A model can only be as good as the rates you give it.
Frequently asked questions
What is car depreciation?
Depreciation is the loss in a vehicle’s market value over time. It is usually the largest single cost of owning a new car, and it is a cost you do not see on a statement: it only shows up when you sell or trade the car for less than you paid.
What rate should I enter?
Rates vary a lot by make, model, mileage, condition and the used-car market, so no single figure is right. Use a rate you have seen for the specific model from a pricing guide or from recent listings of the same car at different ages. The defaults here (20% then 15%) are only placeholders to show the method.
Why use a bigger drop in the first year?
New cars usually lose value fastest in the first year, then more slowly. Declining balance models this: the first year takes a larger percentage, and each later year takes a percentage of the smaller remaining value, so the dollars lost shrink every year.
When is straight-line better?
Straight line takes the same dollar amount each year until a salvage value. It is simple, matches how some businesses depreciate assets for bookkeeping, and is useful for rough planning, but it understates early losses on most new cars.
How does depreciation affect my loan?
If the car loses value faster than the loan balance falls, you owe more than the car is worth. That is negative equity. Check it with the Negative Equity Calculator and plan trade-ins with the Car Trade-In Calculator.