Car Depreciation Calculator Formula
Understand the math behind the car depreciation calculator. Each variable explained with a worked example.
Formulas Used
Estimated Current Value
current_value = purchase_price * pow(1 - annual_depreciation_pct / 100, years_owned)Total Depreciation
total_depreciation = purchase_price - purchase_price * pow(1 - annual_depreciation_pct / 100, years_owned)Value Retained
value_retained_pct = pow(1 - annual_depreciation_pct / 100, years_owned) * 100Variables
| Variable | Description | Default |
|---|---|---|
purchase_price | Purchase Price(USD) | 35000 |
years_owned | Years Owned(years) | 5 |
annual_depreciation_pct | Annual Depreciation Rate(%) | 15 |
How It Works
Car Depreciation Curve
Cars depreciate fastest in the first few years, then the rate of loss slows. A declining balance model captures this pattern.
Formula
Current Value = Purchase Price x (1 - Depreciation Rate)^Years
The average car loses 20% in the first year, then about 15% per year after that. After 5 years, a typical car retains about 37% of its original value.
Worked Example
A $35,000 car owned for 5 years at 15% annual depreciation.
- 01Current value = $35,000 x (0.85)^5 = $35,000 x 0.4437 = $15,530
- 02Total depreciation = $35,000 - $15,530 = $19,470
- 03Value retained = 44.4%
Frequently Asked Questions
Which cars depreciate the least?
Trucks, SUVs, and vehicles from Toyota, Lexus, and Porsche tend to hold value best. Luxury sedans and electric vehicles often depreciate faster.
Does mileage affect depreciation?
Yes. Average is 12,000-15,000 miles/year. Higher mileage increases depreciation. Very low mileage vehicles retain a premium.
When is the best time to buy used?
Cars 2-3 years old offer the best value: they have already absorbed the steepest depreciation but still have years of reliable life ahead.
Ready to run the numbers?
Open Car Depreciation Calculator