Car Depreciation Calculator
Enter a car's purchase price, an annual depreciation rate, and how many years to project forward, to estimate its resale value over time.
How the Car Depreciation formula works
A compound depreciation estimate:
Value after n years = Purchase price × (1 − Depreciation rate)ⁿ
New cars are commonly cited as losing around 20% of value in the first year and roughly 10-15% per year after that, though the actual rate varies significantly by make, model, and mileage.
Step-by-step calculation
- Subtract the annual depreciation rate from 1 to find the fraction of value retained each year.
- Raise that fraction to the power of the number of years.
- Multiply by the original purchase price.
Worked example
A $32,000 car depreciating at 15% per year, projected 5 years out: Value = 32,000 × (0.85)^5 ≈ 32,000 × 0.4437 ≈ $14,200.
Frequently asked questions
Why do new cars lose value so quickly in the first year?
A new car transitions from 'new' to 'used' the moment it's driven off the lot, which alone accounts for a meaningful drop in resale value — commonly cited estimates put first-year depreciation around 20%, noticeably steeper than the roughly 10-15% per year that's typical in subsequent years.
Does this depreciation rate apply to every car equally?
No — depreciation varies significantly by brand, model, reliability reputation, and market demand. Some models are well known for holding value better than average, while others depreciate faster than the general estimate this calculator uses.