Car Depreciation Calculator

Car depreciation is the loss in value a vehicle experiences over time. New cars depreciate fastest in the first year; the rate slows as the vehicle ages. Depreciation is the largest hidden cost of car ownership, and it routinely exceeds fuel, insurance and maintenance put together.

Straight-line depreciation formula: Annual Depreciation = (Purchase Price − Residual Value) ÷ Useful Life (years)

Declining balance (more realistic) formula: Value after n years = Purchase Price × (1 − Depreciation Rate)^n

Typical annual depreciation rates:

• Year 1: 15–25% of original value lost
• Year 2: 12–18% of original value lost
• Year 3: 10–15%
• Year 4: 8–12%
• Year 5: 6–10%
• Years 6–10: 5–8% per year

Total depreciation benchmarks:

• After 1 year: 15–25% of value lost
• After 3 years: 35–45% of value lost
• After 5 years: 50–60% of value lost
• After 10 years: 75–85% of value lost (the average profile below lands at 81%)

Cost-per-mile (depreciation component): Depreciation per mile = Annual Depreciation ÷ Annual Miles Driven

What each variable means:

• Residual value: the estimated trade-in or resale value at a future point. It is what a lease payment is built around and what a trade-in negotiation starts from.
• Annual depreciation rate: varies by brand, model and demand. Trucks and SUVs depreciate slower than sedans. Luxury cars depreciate fastest ($15,000–$25,000 in year one).
• Mileage impact: above 15,000 miles a year, depreciation accelerates by 1–2% for each additional 5,000 miles

Brands that hold value best (5-year residual %, 2024):

• Toyota Tacoma: ~60% of original value retained
• Subaru Outback: ~55%
• Honda CR-V: ~52%
• BMW 7-Series: ~30% (fastest luxury depreciation)
• Chevrolet Malibu: ~28%

Worked example, and this is exactly what the calculator runs: New car at $42,000, average sedan profile. The first year takes 20%, every year after that takes 15% of whatever is left. The two rates differ because the first-year drop is not really depreciation at all, it is the dealer margin and the new-car premium evaporating the moment the title changes hands.

Year 1: $42,000 × 0.80 = $33,600 Year 3: $42,000 × 0.80 × 0.85² = $24,276 Year 5: $42,000 × 0.80 × 0.85⁴ = $17,539

Total depreciation in 5 years: $42,000 − $17,539 = $24,461 lost to depreciation Cost per year: $4,892/year before fuel, insurance, or maintenance.

That is 58% of the price gone in five years, which lands squarely in the 50–60% benchmark above. The monthly depreciation calculator uses the same profile and reports the same figure divided by twelve, and the car value estimator reaches about 40% retained at five years by a completely different route.