What Is Car Depreciation?
Car depreciation is the drop in a car's value as it gets older and is driven more. It is usually the biggest cost of owning a new car, bigger than fuel or insurance, even though you never write a check for it: you notice it when you sell or trade the car in and get much less than you paid.
Depreciation is fastest at the start. On average, a new car loses about 8.6% of its price the moment you drive it off the lot, about 19% in the first year, and then 15% to 17% of its remaining value each year. After 5 years it is worth about 40% of what you paid.
What affects how fast a car depreciates
- Make and model: popular, reliable models hold their value better than less popular ones.
- Mileage: the more miles, the lower the value. Cars are expected to cover about 12,000–15,000 miles a year.
- Condition: normal wear and tear costs less than accident damage or heavy-duty use, such as a truck used off-road.
- Age: older cars are worth less, apart from some classics that gain value.
- History and color: the number of owners, the service record and even an unusual paint color can lower the price.
How to Calculate Car Depreciation
The value at the end of each period is the value before it, minus that period's depreciation rate:
Where V is the car's value and r the depreciation rate for that period. The calculator uses these average rates for a new car:
- Driving off the lot: 8.57% of the new price
- Year 1: 19.04% of the new price (this includes the drive-off loss)
- Year 2: 14.91% of the previous year's value
- Year 3: 15.42% of the previous year's value
- Year 4: 16.16% of the previous year's value
- Year 5: 17.30% of the previous year's value
Example
A new car bought for $38,500 (amounts are rounded to whole dollars at each step):
- Off the lot: $38,500 − ($38,500 × 8.57%) = $35,201.00
- After 1 year: $38,500 − ($38,500 × 19.037%) = $31,171.00
- After 2 years: $31,171.00 − ($31,171.00 × 14.914%) = $26,522.00
- …and so on, to $15,555.00 after 5 years: a total loss of $22,945.00 (60%).
These are averages for a typical new car. Your own car can lose value faster or slower depending on the factors above, so treat the results as an estimate.
How to Use the Automobile Depreciation Calculator
"If I buy a new car for $38,500, how much will it be worth in 5 years, and how much will I lose along the way?" This calculator answers that.
Let's enter the number for this example. It is already filled in when the calculator opens, so you can follow along and then change it to your own car's price.
- New Car Price: Enter 38,500, which is the price you pay for the new car. It must be greater than 0.
Calculate and Reset
Click Calculate to see your results. If the box has a problem, such as a letter instead of a number, a message pops up under it instead. With the default price you get:
- Your Results: a short summary in words: $3,299.00 lost driving off the lot, $7,329.00 in the first year, and a value of $15,555.00 after 5 years.
- Value After 5 Years: the headline number, $15,555.00.
- Total Depreciation, Value Lost, Lost Driving Off the Lot and Lost in Year 1: $22,945.00, 60%, $3,299.00 and $7,329.00.
- Chart: the car's value (teal) shrinking over the years, with the amount lost (amber) on top; together they always add up to the price you paid. Hover over a point to see the numbers.
- Year-by-year cards: one card for each point in time, from brand new to 5 years. The wheel shows how much of the value is left (the faded part is what's gone), the price tag shows the car's value, and underneath is the drop since the card before and the total lost. A summary card wraps up the averages.
- Table: for each point in time, the miles (at 15,000 a year), the value, the percent of the new price, the drop since the row above and the total lost so far.
- Share Results: a link that opens this calculator with your price filled in. Copy it, or share it on Facebook or X.
Amounts of $1 million or more are shortened, for example $1.25M. Click Reset to put the price back to $38,500 and show the default results again.
How to Limit Your Car's Depreciation
You can't stop depreciation, but you can slow it down:
- Keep the miles down: driving under about 10,000 miles a year keeps the odometer low and means less wear and fewer accidents.
- Park in a garage or covered spot: it protects the paint and keeps the car safe from hail and bad weather.
- Follow the maintenance schedule: regular oil changes, tire rotations and keeping the service records show buyers the car was looked after.
- Consider a lightly used car: buying a car that is 1–3 years old lets the first owner take the biggest drop.