Vehicle depreciation is the difference between the amount you paid for a car and its current market value. It is typically the single largest expense of owning a new car, often exceeding the cost of fuel, insurance, and maintenance combined. Understanding your vehicle's depreciation rate is crucial for determining the total cost of ownership and making informed buying or selling decisions.
Did you know? On average, a new car loses about 20% of its value within the first year and roughly 15-18% per year for the next four years.
How This Calculator Works
This calculator determines the rate at which your vehicle is losing value using the Compound Annual Growth Rate (CAGR) formula, inverted for depreciation. The metrics calculated include:
Total Value Lost: The absolute dollar amount lost since purchase.
Total Depreciation Percentage: The total percentage of the original value that has evaporated.
Average Annual Depreciation Rate: The compounded yearly percentage rate at which the car loses value. This is the most accurate metric for comparing cost efficiency between different vehicles.
The Math Behind Car Depreciation
While a simple percentage drop is easy to calculate, the annual rate provides a better picture of long-term value retention. The formula used is:
This formula accounts for the compounding effect, where the depreciation is calculated against the car's diminishing value each year, rather than the original sticker price.
Key Factors Influencing Depreciation
Not all cars depreciate at the same rate. Several factors play a critical role:
Mileage: The more miles on the odometer, the lower the resale value. High mileage implies more wear and tear on mechanical components.
Make and Model: Luxury sedans often depreciate faster than economy hatchbacks or SUVs. Certain brands are renowned for holding value due to reliability reputations.
Condition: Exterior scratches, interior stains, and accident history significantly impact the "Current Market Value."
Market Trends: Fuel prices, economic shifts, and new model releases can alter the desirability of used vehicles.
How to Minimize Depreciation
While you cannot stop depreciation, you can slow it down by maintaining your vehicle strictly according to the manufacturer's schedule, keeping detailed service records, parking in a garage to protect the paint, and choosing neutral colors that are easier to resell. Additionally, buying a used vehicle that is 2-3 years old allows the previous owner to absorb the steepest part of the depreciation curve.
function calculateDepreciation() {
// 1. Get input values using var
var purchasePrice = document.getElementById("purchasePrice").value;
var currentValue = document.getElementById("currentValue").value;
var ownershipPeriod = document.getElementById("ownershipPeriod").value;
var resultDiv = document.getElementById("result");
// 2. Parse values to floats
var startPrice = parseFloat(purchasePrice);
var endPrice = parseFloat(currentValue);
var years = parseFloat(ownershipPeriod);
// 3. Validation
if (isNaN(startPrice) || isNaN(endPrice) || isNaN(years)) {
resultDiv.style.display = "block";
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (startPrice <= 0 || years startPrice) {
// Edge case: Appreciation (rare for standard cars, but possible for classics)
var profit = endPrice – startPrice;
var profitPercent = (profit / startPrice) * 100;
resultDiv.style.display = "block";
resultDiv.innerHTML =
'