Car Depreciation Calculator Formula
Understand the math behind the car depreciation calculator. Each variable explained with a worked example.
Formulas Used
Estimated Value
current_value = purchase_price * pow(1 - annual_depreciation / 100, years)Total Depreciation
total_depreciation = purchase_price - purchase_price * pow(1 - annual_depreciation / 100, years)Average Annual Loss
annual_loss = (purchase_price - purchase_price * pow(1 - annual_depreciation / 100, years)) / yearsVariables
| Variable | Description | Default |
|---|---|---|
purchase_price | Purchase Price(USD) | 35000 |
annual_depreciation | Annual Depreciation Rate(%) | 15 |
years | Years Owned(years) | 5 |
How It Works
How Car Depreciation Works
Vehicles lose value each year following a declining balance pattern. The largest loss occurs in the first year.
Formula
Value = Purchase Price x (1 - Depreciation Rate)^Years
The average car depreciates 15-20% per year, with new cars losing about 20% in the first year alone.
Worked Example
$35,000 car depreciating at 15% per year for 5 years.
purchase_price = 35000annual_depreciation = 15years = 5
- 01Year 1 value = $35,000 x 0.85 = $29,750
- 02Year 2 value = $29,750 x 0.85 = $25,288
- 03Year 5 value = $35,000 x 0.85^5 = $15,536
- 04Total depreciation = $35,000 - $15,536 = $19,464
- 05Average annual loss = $19,464 / 5 = $3,893/year
Ready to run the numbers?
Open Car Depreciation Calculator