Car Depreciation Calculator
Worth $16,704 after 5 years.
| Year | Value | Lost that year | % of original |
|---|---|---|---|
| New | $40,000 | — | 100% |
| 1 | $32,000 | $8,000 | 80% |
| 2 | $27,200 | $4,800 | 68% |
| 3 | $23,120 | $4,080 | 58% |
| 4 | $19,652 | $3,468 | 49% |
| 5 | $16,704 | $2,948 | 42% |
| Summary | Value |
|---|---|
| Total depreciation | $23,296 (58% of the price) |
| Average per year | $4,659 |
| Average per month | $388 |
| Per mile driven | $0.39 |
| Year-one loss alone the cost of buying new | $8,000 |
Depreciation is modelled as a large first-year drop followed by a steadier annual percentage, because that is how it actually behaves — a new car loses a substantial share of its value the moment it is registered, then settles into a gentler curve. A flat rate badly understates year one, which is precisely the reason buying a one- or two-year-old car is such durable advice: someone else has absorbed the steepest part. The profiles here are broad averages and real curves vary enormously by make, model, trim, colour, and how the market moves — a model with a long waiting list can hold value far better than its class average, and a discontinued one far worse. Mileage, condition, and service history all move the number too. Treat this as a planning figure, and check a valuation guide for a specific car. Depreciation is usually the single largest cost of owning a car, and the one that never appears on a statement.
See what a car will be worth each year, how much value it loses, and what that depreciation really costs per year and per mile.
How to use this calculator
- Enter the purchase price.
- Pick a depreciation profile, or choose Custom and set the rates yourself from a valuation guide for your specific model.
- Set the number of years you want to project.
- Add your annual mileage to see depreciation expressed per mile — which is how it compares against fuel.
The formula
Value after year 1 = Price × (1 − First-year rate) · Each later year = Previous value × (1 − Later rate)
This is declining balance: each year's loss is a percentage of what the car is worth now, not of its original price, which is why the annual loss shrinks over time.
Worked example — a $40,000 car over 5 years
Average profile: 20% in year one, 15% a year thereafter.
| Year | Value | Lost that year | % of original |
|---|---|---|---|
| New | $40,000 | — | 100% |
| 1 | $32,000 | $8,000 | 80% |
| 2 | $27,200 | $4,800 | 68% |
| 3 | $23,120 | $4,080 | 58% |
| 4 | $19,652 | $3,468 | 49% |
| 5 | $16,704 | $2,948 | 42% |
Total lost: $23,296, an average of $4,659 a year — but that average conceals the shape. Year one alone costs $8,000, nearly three times year five. At 12,000 miles a year, this car depreciates at 39 cents per mile, which is roughly three times what its fuel costs.
The curve is the whole story
Depreciation is not a straight line, and treating it as one leads to bad decisions. It is a declining balance: each year the car loses a percentage of what it is worth now, so the absolute loss shrinks every year even though the percentage stays roughly constant.
This has two consequences worth internalising. First, the first year is by far the most expensive — which is the entire argument for buying a car that is already a year or two old, where someone else has paid for the steepest part. Second, keeping a car longer reduces your cost per year, because you spread the same total loss across more years and the later years are the cheap ones. Trading every three years means repeatedly buying the expensive part of the curve.
What holds value and what does not
| Category | Year 1 | Later years | 5-year value retained |
|---|---|---|---|
| Trucks, popular SUVs | ~13% | ~11% | ≈ 55% |
| Average new car | ~20% | ~15% | ≈ 42% |
| Luxury sedans, some EVs | ~30% | ~18% | ≈ 31% |
| Used car, 3+ years old | ~12% | ~12% | ≈ 53% |
These are broad averages and the spread within each category is wide. Supply matters enormously — a model with a waiting list can hold value far better than its class average, while one being replaced by a new generation falls faster. Check a valuation guide for the specific car rather than trusting a category.
Why this is the number that matters
Depreciation is usually the single largest cost of owning a car, and the only major one that never appears on a statement. Fuel has a receipt. Insurance has a bill. Depreciation just happens, silently, and you discover the total when you sell.
That invisibility is why the monthly payment is such a poor guide to what a car costs. A car with a modest payment on a long term can be losing value far faster than you are paying the loan down — which is exactly the mechanism that leaves people underwater. Run the numbers here alongside the cost of ownership calculator to see depreciation next to everything else.
Reducing what it costs you
- Buy used. A two- or three-year-old car skips the steepest part entirely.
- Keep it longer. The same total loss over more years is a lower cost per year.
- Choose for resale. Reputation, colour, and specification all move the number.
- Keep records. A full service history genuinely raises the price a buyer will pay.
- Sell privately. Usually recovers meaningfully more than a trade-in, at the cost of effort.
How we calculate this
Depreciation is modelled as a declining-balance curve with a separate, larger first-year rate — value at the end of each year is the previous value times (1 − rate). Splitting year one from the rest matters: a single flat rate badly understates the initial drop, which is the most consequential part of the curve and the entire basis for the advice to buy a car that is a year or two old. The profiles are broad class averages and every field stays editable, because real curves vary enormously by model, trim, market conditions, and condition.
Sources
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Frequently asked questions
How much does a car depreciate in 5 years?
A typical new car loses roughly 60% of its value over five years — about 20% in the first year and 15% a year after that. A $40,000 car following that curve is worth about $16,700 after five years, having lost $23,300. Fast depreciators can lose 70% or more; trucks and some SUVs hold value much better.
How much value does a new car lose when you drive it off the lot?
Less than the folklore suggests as an instant event, but the first year really is brutal — commonly 20% and sometimes 30% on cars that were heavily discounted or are being replaced by a new generation. The moment you register it, the car becomes used, and the retail-to-trade gap alone is several thousand dollars.
Why is buying a 2 or 3 year old car better value?
Because someone else has absorbed the steepest part of the curve. A three-year-old car has typically lost 40–45% of its value but has 60–70% of its useful life left, and is often still under the balance of a factory warranty. The depreciation you then experience is the gentler part of the curve.
Which cars hold their value best?
Trucks and body-on-frame SUVs consistently top the lists, along with a handful of brands with strong reputations for reliability and limited supply. Cars that depreciate hardest tend to be large luxury sedans, heavily discounted models, and vehicles being replaced by a new generation. A long waiting list is a leading indicator of strong resale.
Does mileage affect depreciation?
Substantially. Around 12,000–15,000 miles a year is considered average, and a car meaningfully above that is worth less than the same car below it. Very low mileage is not automatically good either — cars that sit develop their own problems, and buyers discount an unusually low-mileage older car accordingly.
Do electric cars depreciate faster?
Historically yes, and often considerably faster, driven by rapid improvements in range and battery technology making older models look dated, plus uncertainty about battery life. The picture is changing as the technology matures and battery warranties become better understood, but it is worth checking real values for the specific model rather than assuming.
How do I reduce depreciation?
Buy used rather than new; choose a model with a good resale reputation; keep the mileage reasonable; keep full service records, which genuinely move the price; keep the car in a common colour and specification; and keep it longer, since the annual loss shrinks as the car ages. Selling privately rather than trading in usually recovers more, too.
Is depreciation really a cost if I never sell the car?
Yes. If you drive a car to the end of its life you have consumed 100% of its value, which is simply depreciation taken all the way. Keeping a car longer does not avoid depreciation — it spreads it over more years, which is exactly why it lowers your cost per year. That is the real argument for keeping cars.