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.
- 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
Frequently Asked Questions
How much does a new car depreciate in the first year?
New cars typically lose 20-25% of their value in the first year. This is why buying a 1-2 year old used car can save significant money.
What factors affect depreciation?
Brand reputation, mileage, condition, market demand, fuel economy, and whether the model has been redesigned all affect depreciation rates.
Which cars hold their value best?
Trucks, SUVs, and certain brands (Toyota, Lexus, Porsche) tend to depreciate slower. Luxury sedans and electric vehicles with outdated tech depreciate faster.
Ready to run the numbers?
Open Car Depreciation Calculator