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.
purchase_price = 35000years_owned = 5annual_depreciation_pct = 15
- 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%
Ready to run the numbers?
Open Car Depreciation Calculator