Determining the fair market value of a used vehicle involves analyzing depreciation curves, usage intensity, and physical condition. Unlike loans or fixed financial products, car valuation is variable and depends heavily on specific market factors. This guide explains the logic used in the calculator above.
1. The Depreciation Curve
Depreciation is the largest factor in reducing a car's value. The moment a new car is driven off the lot, it loses a significant portion of its value.
Year 1: The steepest drop typically occurs in the first year, often ranging from 15% to 20%.
Subsequent Years: Depreciation stabilizes to roughly 10% to 15% per year, compounded.
Luxury vs. Economy: Luxury cars generally depreciate faster (around 20% annually) due to high maintenance costs and lower demand in the used market. Economy cars (like Toyota or Honda) hold value better due to reliability and demand.
2. Impact of Mileage
Mileage is a direct indicator of the remaining life of the vehicle's components. The average car is driven approximately 12,000 to 15,000 kilometers (or miles) per year.
Low Mileage: If a car has significantly lower mileage than average for its age, its value increases.
High Mileage: Excess mileage accelerates mechanical wear, reducing the valuation. Our calculator applies a penalty factor for mileage exceeding the standard yearly average.
3. Vehicle Condition Grading
The physical and mechanical state of the car acts as a multiplier on the depreciated base value.
Excellent: No scratches, perfect mechanical history, new tires. (Value Premium applied)
Good: Normal wear consistent with age, minor cosmetic flaws. (Standard Value)
Fair: Visible scratches, dents, or worn interior. Maintenance may be due soon. (Value Reduction applied)
Poor: Significant damage, rust, or engine issues. (Significant Value Reduction applied)
4. Calculating Residual Value
The mathematical formula for the base depreciated value (before mileage and condition adjustments) follows a declining balance method:
Current Value = Original Price × (1 – Depreciation Rate) ^ Age in Years
Once this base value is determined, adjustments are made for mileage deviations and condition multipliers to provide the final estimated rate.
Tips for Buyers and Sellers
If you are selling, gathering service records can help prove your car belongs in the "Excellent" or "Good" category. If you are buying, use this calculated rate as a baseline for negotiation. Always inspect the vehicle independently or hire a mechanic, as a calculator cannot see the actual car.
function calculateUsedCarRate() {
// 1. Get Inputs
var originalPrice = parseFloat(document.getElementById('originalPrice').value);
var age = parseFloat(document.getElementById('carAge').value);
var mileage = parseFloat(document.getElementById('mileage').value);
var depreciationRate = parseFloat(document.getElementById('brandSegment').value);
var conditionMultiplier = parseFloat(document.getElementById('carCondition').value);
// Validation
if (isNaN(originalPrice) || isNaN(age) || isNaN(mileage)) {
alert("Please enter valid numbers for price, age, and mileage.");
return;
}
if (originalPrice = 1
// Then apply the specific brand rate for subsequent years
var currentValue = originalPrice;
if (age > 0) {
// First year heavy hit (Standard across most cars is ~15-20%)
var firstYearRate = 0.20;
currentValue = currentValue * (1 – firstYearRate);
// Subsequent years compounded
if (age > 1) {
var remainingYears = age – 1;
currentValue = currentValue * Math.pow((1 – depreciationRate), remainingYears);
}
} else if (age === 0) {
// "New" car just driven off lot
currentValue = currentValue * 0.90;
}
// 3. Mileage Adjustment
// Standard average mileage per year assumed to be 15,000
var standardMileage = age * 15000;
if (age === 0) standardMileage = 500; // minimal mileage for brand new
var mileageDifference = standardMileage – mileage;
// If mileage is lower than standard, add value (capped).
// If higher, subtract value.
// Rate: 0.5% value change per 5,000 units variance
var mileageAdjustmentFactor = (mileageDifference / 5000) * 0.02; // 2% per 5k variance
// Cap the mileage bonus to prevent unrealistic increases for garage queens
if (mileageAdjustmentFactor > 0.15) mileageAdjustmentFactor = 0.15;
// Cap penalty to avoid negative value
if (mileageAdjustmentFactor < -0.50) mileageAdjustmentFactor = -0.50;
// Apply mileage adjustment to the depreciated value
currentValue = currentValue * (1 + mileageAdjustmentFactor);
// 4. Condition Adjustment
currentValue = currentValue * conditionMultiplier;
// 5. Scrap Value Floor
// A car rarely drops below 5-10% of original value unless scrapped
var scrapValue = originalPrice * 0.05;
if (currentValue < scrapValue) {
currentValue = scrapValue;
}
// 6. Formatting Output
// Round to nearest integer
var finalRate = Math.round(currentValue);
var totalDepreciationAmount = originalPrice – finalRate;
var depreciationPercentage = ((totalDepreciationAmount / originalPrice) * 100).toFixed(1);
var residualPercentage = (100 – depreciationPercentage).toFixed(1);
// Display results
var resultBox = document.getElementById('result');
var valueDisplay = document.getElementById('finalValue');
var depText = document.getElementById('depreciationText');
var resText = document.getElementById('residualText');
resultBox.style.display = 'block';
// Format currency (generic locale)
valueDisplay.innerHTML = finalRate.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
depText.innerHTML = "Total Depreciation: " + depreciationPercentage + "% (" + totalDepreciationAmount.toLocaleString() + " lost)";
resText.innerHTML = "Residual Value: " + residualPercentage + "% of original price";
}