Car depreciation is the difference between the amount you spent on a vehicle and the amount you can get for it when you sell or trade it in later. It is typically the single largest expense of owning a new car, often exceeding the cost of fuel, insurance, or maintenance during the first few years of ownership.
How Car Depreciation Works
The moment you drive a new car off the dealership lot, its value drops significantly—often by 10% to 20% immediately. Over the first year, a car can lose up to 30% of its initial value. After the first year, depreciation typically slows down to a rate of 10% to 15% per year.
Key Factors Influencing Your Car's Value
Age: Generally, the older the car, the less it is worth. However, the steepest decline occurs in years 1 through 3.
Mileage: High mileage suggests more wear and tear on the engine and components. The average driver covers about 12,000 to 15,000 miles per year. Exceeding this will accelerate depreciation.
Condition: Mechanical health, interior cleanliness, and exterior paint quality play massive roles in resale value.
Brand Reputation: Some brands (like Toyota and Honda) historically retain their value better than luxury brands or discontinued models.
Calculation Example
If you buy a sedan for $30,000:
After 1 Year: Value may drop to $24,000 (20% loss).
After 3 Years: Value may drop to $18,000 (approx. 40% total loss from original price).
After 5 Years: Value may drop to $12,000 (approx. 60% total loss).
How to Minimize Depreciation
While you cannot stop depreciation entirely, you can slow it down by keeping mileage low, performing regular scheduled maintenance, and choosing car colors and features that have broad market appeal. Additionally, buying a "nearly new" car (2–3 years old) allows the previous owner to absorb the steepest part of the depreciation curve.
function calculateDepreciation() {
var price = parseFloat(document.getElementById('purchasePrice').value);
var age = parseFloat(document.getElementById('carAge').value);
var mileage = parseFloat(document.getElementById('annualMileage').value);
var conditionMod = parseFloat(document.getElementById('carCondition').value);
if (isNaN(price) || isNaN(age) || isNaN(mileage) || price 0) {
var firstYearAge = Math.min(age, 1);
currentValue = currentValue * (1 – (0.20 * firstYearAge));
}
// Apply subsequent years depreciation (average 15% per year)
if (age > 1) {
var remainingAge = age – 1;
for (var i = 0; i standardMileage && age > 0) {
var excessMileage = actualTotalMileage – standardMileage;
var mileagePenalty = (excessMileage / 1000) * 0.01;
// Cap mileage penalty at 25% of current calculated value
if (mileagePenalty > 0.25) mileagePenalty = 0.25;
currentValue = currentValue * (1 – mileagePenalty);
}
// Condition Adjustment
currentValue = currentValue * conditionMod;
// Floor the value at 10% of purchase price (salvage/base utility value)
if (currentValue < (price * 0.10)) {
currentValue = price * 0.10;
}
var totalDepreciation = price – currentValue;
var percentageRetained = (currentValue / price) * 100;
// Format results
document.getElementById('currentValueDisplay').innerText = '$' + currentValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalDepreciationDisplay').innerText = '-$' + totalDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('percentageRetainedDisplay').innerText = percentageRetained.toFixed(1) + '%';
// Show results area
document.getElementById('resultsArea').style.display = 'block';
}