Car Depreciation Calculator
A new car loses roughly 20% in year one and about 15% a year after that — around half its value in five years. This calculator projects your vehicle's worth year by year and shows the total value it loses over the time you own it.
Use this car depreciation calculator to see the biggest and most invisible cost of owning a car. Enter the purchase price, the first-year and following-year depreciation rates and the number of years, and it returns the value at the end of each year, the total depreciation, and the share of the original price that is gone.
Enter the price and depreciation rates, then press Calculate.
How the car depreciation calculator works
Depreciation is the value a car loses as it ages, and it does not fall in a straight line. The first year is the steepest — a new car becomes a used car the moment it leaves the lot — so this calculator applies a separate, larger first-year rate. Each following year it applies a gentler rate to the value that remains, compounding downward, which mirrors how real cars lose value quickly at first and then more slowly.
The result is a year-by-year table of what the car is worth, the total depreciation in dollars, and the percentage of the original price that has gone. Because depreciation drives your resale value, it feeds directly into decisions you can model elsewhere: whether to lease or buy, how much car you should afford, and how quickly a loan builds equity against the falling value.
The depreciation model
- First year — the steep initial drop
- Following — the gentler annual decline
- Compounds — on the reducing value
The cost you never see
Depreciation is usually the largest single cost of owning a car, often outweighing fuel, insurance and maintenance combined — yet because you never write a cheque for it, it hides in plain sight. It is the gap between what you paid and what you can sell for, and it is realized the day you trade or sell. Seeing it laid out year by year reframes car buying: a slightly cheaper car, or one that holds value better, can save more over five years than years of careful fuel economy.
How to beat the average
You cannot stop depreciation, but you can blunt it. Buying a one-to-two-year-old car lets someone else absorb the brutal first-year drop while you get a nearly new vehicle. Choosing models known for reliability and strong resale, keeping mileage moderate, maintaining the car with records, and picking mainstream colours all support a higher resale price. And keeping a car well past the loan spreads that lost value over more years, which is why long ownership is one of the cheapest ways to drive.
Which cars hold their value best?
Not all cars depreciate at the same speed. Vehicles known for reliability and steady demand lose value slowest, which is why brands like Toyota, Honda, Subaru and Lexus — along with popular pickups and body-on-frame SUVs such as the Toyota Tacoma and 4Runner — have long topped resale-value rankings, and a handful of sought-after sports and luxury models hold value well too. The common threads are dependability, limited supply, low running costs and a trusted reputation, all of which keep used buyers competing for the car. Rankings do shift from year to year, so check current data from sources such as Kelley Blue Book or Edmunds, but choosing a strong-resale model is one of the best ways to cut the biggest cost of ownership before it ever hits you.
Estimate only — not financial advice. Real depreciation varies widely by make, model, condition, mileage and market. Use model-specific data for a precise resale estimate.
How to use it & key terms
Enter the purchase price, the first-year and following-year depreciation rates and the years to project, then press Calculate to see the value each year.
| Term | What it means |
|---|---|
| Depreciation | The value a car loses as it ages. |
| First-year rate | The steep value drop in year one, often ~20%. |
| Following rate | The gentler yearly decline after year one, often ~15%. |
| Residual / resale value | What the car is worth at a given point. |
| Total depreciation | Purchase price minus the final value. |
| Upside down | Owing more on the loan than the car is worth. |
Sources & methodology
The calculator applies the first-year depreciation rate to the purchase price to get the value after one year, then applies the following-year rate to each subsequent year's value, compounding on the declining balance. The total depreciation is the purchase price minus the projected value at the end of the chosen period, and the percentage lost is that total divided by the price. This reduced-balance approach reflects the well-documented pattern of a steep first-year drop followed by a steadier annual decline. Actual depreciation depends heavily on the specific make, model, mileage, condition and market, so model-specific data gives a more precise figure.
Sources: Standard reducing-balance depreciation with the widely cited ~20% first-year and ~15% subsequent-year new-car averages.
Using the depreciation curve to time a sale
The shape of the depreciation curve — steep at first, then flattening — is not just a fact to accept; it is a guide to the best time to sell. In the early years the car loses value fast, so selling then hands over a large slice of what you paid. Later, once the curve flattens, each additional year of ownership costs less in lost value, which is why the cost per year of keeping a car falls the longer you hold it.
That points to two sensible strategies at opposite ends of the curve. One is to sell while the car still holds most of its value and let the next owner ride the gentler slope — this suits people who like a newer car and accept paying for the privilege. The other is to keep the car well past the point where the loan is paid off, spreading that steep early loss across many payment-free years, which is usually the cheapest way to drive. The costly middle path is trading every couple of years, paying the steepest part of the curve again and again.
Timing also interacts with a few predictable step-downs in value. Prices tend to soften at round mileage milestones, when the factory warranty runs out, and when the manufacturer redesigns the model and yours becomes the older shape. None of these is a precise cliff, but each is a threshold buyers notice, so a sale placed on the right side of it holds up better. If you are near one of those markers and already planning to sell, doing so just before it — rather than just after — can protect a meaningful part of the price.
Use the year-by-year table above to see this for your own numbers. Read down the column of values and watch the annual loss shrink; the year where the drop becomes small is roughly where holding on turns cheap and selling turns expensive. Pair that with your own plans — how long you want the car and how far you drive — and the curve stops being an abstract pattern and becomes a practical answer to the question of when to let the car go. There is no single right answer, only the one that fits how you use the car and what the remaining value is worth to you.
Frequently asked questions
How fast do cars depreciate?
A typical new car loses around 20% of its value in the first year and roughly 15% a year after that, so it is worth only about half its original price after five years. The exact rate varies widely by make, model, condition and mileage — some vehicles hold value far better than others — but the pattern of a steep first-year drop followed by a gentler decline is nearly universal, and it is the single biggest cost of owning a new car.
How is car depreciation calculated?
This calculator applies a first-year depreciation rate to the purchase price, then a separate annual rate to each following year, compounding on the reducing value. So a $40,000 car losing 20% in year one falls to $32,000, then losing 15% a year drops to about $27,200, $23,120 and so on. The total depreciation is the purchase price minus the final value, and the calculator shows the value at the end of every year.
Why is first-year depreciation the highest?
A new car becomes a used car the moment it is driven off the lot, and that change alone erases a chunk of value — buyers will not pay new-car prices for a car with an owner and miles on it. The first year also carries the fastest drop in desirability and the start of warranty use. After that initial cliff, depreciation settles into a steadier annual decline as the car ages more predictably.
Which cars hold their value best?
Vehicles with strong reliability reputations, steady demand and limited supply tend to depreciate the slowest — often certain trucks, SUVs and well-regarded brands. Cars that were heavily discounted when new, or that flooded the market, usually depreciate fastest. Low mileage, good condition, a popular colour and a full service history all help a specific car beat the average, while high mileage and wear pull it below.
Does mileage affect depreciation?
Yes, significantly. Higher-than-average mileage lowers a car's value because it signals more wear and less remaining life, while below-average mileage supports a higher resale price. The average is often taken as roughly 12,000 to 15,000 miles a year, and cars far above that line depreciate faster than a simple age-based rate suggests. This calculator uses an age-based rate, so adjust your expectation down for high mileage.
Why does depreciation matter?
Depreciation is usually the largest cost of owning a car — often bigger than fuel, insurance or maintenance — yet it is invisible because you never write a cheque for it. It determines your resale or trade-in value, how quickly you build equity against a loan, and whether you might end up owing more than the car is worth. Understanding it helps you buy smarter, time a sale well, and avoid being caught upside down.
Is it better to buy a new or used car?
It depends on what you value, but for pure depreciation, used usually wins. A new car can lose around a fifth of its value in the first year alone, so buying a well-kept vehicle that is two to three years old lets someone else absorb that steepest drop while you still get most of the car's life. New cars offer the latest technology, a full warranty and no mystery history, which can be worth the premium. If lowest total cost is the goal, a lightly used car in the depreciation sweet spot is usually the smarter buy.
How long does a car last?
With regular maintenance, a modern car commonly lasts around 200,000 miles or roughly 12 to 15 years, and many well-cared-for vehicles go well beyond that. Longevity and depreciation are linked, because cars from brands with a reputation for going the distance tend to hold their value better, as buyers trust they have plenty of life left. Staying on top of servicing not only extends a car's life but also protects its resale value when you sell.