Car Depreciation Calculator
Calculate how much your vehicle loses in value over time.
Most cars depreciate 15–20% per year
Results update as you type.
This calculator is for illustrative purposes only. Actual rates, fees and terms vary by lender. Consult a qualified financial adviser before making borrowing decisions.
How it works
Vehicle depreciation is the single largest cost of car ownership that most people underestimate. A new car loses approximately 15–20% of its value in the first year alone, with another 10–15% in each subsequent year. By year five, most vehicles are worth only 35–50% of their original sticker price. Luxury vehicles and certain mainstream brands depreciate faster than average; trucks, SUVs, and some Japanese models hold their value better. This car depreciation calculator uses the declining-balance method, which applies a constant percentage to the vehicle's current value — matching real market behavior more closely than straight-line depreciation. A car depreciation calculator has practical applications beyond curiosity. If you buy a new car and sell in two or three years, the depreciation loss is a real cost embedded in your total transportation expense. Leasing, in theory, prices this depreciation into the monthly payment and returns the vehicle before the slow depreciation years, which is why monthly lease payments are lower than loan payments on the same vehicle. Keeping a car past the point of heavy depreciation (typically years six through ten) drops your cost per mile substantially — often the most economical approach to total ownership cost. Buying a vehicle two to three years old captures someone else's heavy depreciation loss and often still enjoys warranty coverage.
Value after n years = Purchase Price × (1 − depreciation rate)^n
The declining balance method applies the depreciation rate to the remaining value each year, not the original price. This creates the familiar curve where depreciation is heaviest in early years (when the value is highest) and slows as the car ages. After n years, the retained value equals the purchase price multiplied by (1 minus the rate) raised to the power of the number of years.
Source:IRS Publication 463 / MACRS depreciation methodology
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter purchase price.
- 2
Adjust the options
Adjust annual depreciation rate and years to calculate if they apply — sensible defaults are already set.
- 3
Read your result
Value after specified years updates instantly as you type — no button to press.
Frequently asked questions
How much does a new car depreciate in the first year?
A new car typically loses 15–20% of its value the moment you drive it off the lot and through the first year of ownership. Some luxury and specialty vehicles can drop 25–30% in year one. After the first year, depreciation continues but slows: typically 10–15% per year for years two through five. By the five-year mark, most mainstream vehicles have lost 50–60% of their original value. This first-year cliff is why buying a car that is one or two years old offers a significant discount on an essentially similar vehicle.
Which cars depreciate the most and least?
Cars that depreciate fastest tend to be luxury sedans (BMW 7-Series, Mercedes S-Class), electric vehicles with rapidly improving technology, and brands with poor reliability reputations. Cars that hold their value best include pickup trucks (Toyota Tacoma, Ford F-150), Japanese SUVs (Toyota 4Runner, Subaru Outback), and certain sports cars. Tesla Model 3 and Y have shown above-average retention in recent years. Kia and Hyundai have improved their residual values significantly with improved reliability and desirability.
How does depreciation affect leasing vs. buying?
Depreciation is the foundation of a lease payment. A lease essentially finances only the depreciation (plus interest and fees) during the lease term rather than the full vehicle price. If a $40,000 car is expected to be worth $26,000 after 36 months — 35% depreciation — the lease payment finances $14,000 over 36 months. This is why vehicles with strong residual values (low depreciation) tend to have lower lease payments and vice versa. When a manufacturer's captive finance arm inflates the residual value, they subsidize an artificially low lease payment, making leasing more attractive than it would otherwise be.
Can I claim car depreciation as a tax deduction?
If you use a vehicle for business, you can deduct depreciation as a business expense. The IRS provides two methods: actual expense method (tracking real costs and claiming a percentage for business use, including MACRS depreciation) and the standard mileage rate (a per-mile rate that covers all variable costs including depreciation — 67 cents/mile in 2024). For heavy SUVs and trucks used for business, Section 179 and bonus depreciation provisions allow large upfront deductions. Personal vehicle depreciation is not tax-deductible. Consult a tax professional for specific guidance on your situation.
At what age is a car the best value to buy?
From a pure value perspective, buying a car that is 2–4 years old tends to offer the best combination of low price, remaining useful life, and available warranty coverage. At this age, the previous owner has absorbed the steepest depreciation, yet the car is recent enough to benefit from modern safety and technology features. Certified pre-owned (CPO) programs from manufacturers like Toyota, Honda, and BMW add extended warranties and rigorous inspection standards to used vehicles, reducing the risk of buying used. Beyond five years, value keeps improving but reliability risk increases, especially past 100,000 miles.