How Car Depreciation Works

Understand how car depreciation works, why cars lose value, and how to estimate depreciation for your vehicle.

Understanding Car Depreciation

Depreciation is the decrease in a car's value over time. It's typically the largest cost of car ownership, often exceeding fuel, insurance, and maintenance combined.

How Depreciation Works

New cars: Lose 20-30% of value in the first year, then 15-20% annually

Used cars: Depreciate slower, typically 10-15% per year

After 5 years: Most cars retain 30-50% of original value

Factors Affecting Depreciation

  • Mileage: Higher mileage = lower resale value
  • Brand reputation: Luxury brands often depreciate faster
  • Vehicle condition: Accidents and poor maintenance reduce value
  • Market demand: Popular models hold value better
  • Age: Older cars depreciate slower but have lower absolute value

Depreciation Models

Different models estimate depreciation:

  • Simple Annual Percent: Fixed percentage loss each year
  • First Year Drop + Annual: Accounts for larger first-year loss
  • Fixed Resale Value: Based on known future resale value

Calculate Your Car's Depreciation

Use our Car Depreciation Calculator to estimate how much your car will depreciate over time.