How this calculator works
A new car loses a large part of its value as soon as it is registered, then continues to fall each year. This calculator models that with two rates: a bigger drop in the first year and a smaller one in each later year. The first-year rate applies once, and the later rate compounds on the value left. You can set both rates yourself, because depreciation depends on the make, model, demand and mileage. Used cars experience different curves, and some hold value far better than others. The default of 20% in the first year and 12% a year after is a common planning assumption, not a guarantee. The model ignores mileage, condition, accident history and market cycles, all of which can move the value materially. It also ignores the extra loss from trading in to a dealer, who must resell at a profit, so a private sale usually fetches more than the trade-in value.
Formula
Value after year k = price x (1 - first-year rate) x (1 - later rate)^(k-1) for k of at least one, and the price at year 0. Total depreciation = price - current value. Remaining share = current value / price. Average loss per year = total depreciation / years.
Worked example
A $35,000 car losing 20% in the first year and 12% a year after is worth $28,000 after one year, $24,640 after two and $16,791.47 after five. Total depreciation over five years is $18,208.53, leaving 47.98% of the price and an average loss of $3,641.71 a year.
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Frequently asked questions
How fast do new cars depreciate?
Depreciation varies widely, but a common rule of thumb is about 20% in the first year and 10% to 15% a year afterwards. Popular models that hold value well can do much better, and discontinued or high-mileage models can do worse.
Does mileage affect the value?
Yes. Above-average mileage reduces the value, and below-average mileage can raise it. The model uses time only, so adjust the result for your expected annual mileage.
Which cars hold their value best?
In general, vehicles with strong demand, low running costs and a reputation for reliability depreciate more slowly. Trucks and some off-road models often hold value well, but the market changes over time.
Should I use this for an older car?
Partially. The two-rate curve fits a new car. For an older car, set the first-year rate to zero and use a lower later-year rate, or start from the car's current value rather than its original price.