What this tool does
This calculator projects how much value your vehicle will lose over 1 to 10 years, giving you a year-by-year breakdown of annual loss, cumulative depreciation, and the percentage of value gone. It also computes your depreciation cost per mile — one of the most honest ways to understand the true cost of owning a car.
Enter your purchase price, choose a vehicle type, set how many miles you drive per year, and select a projection horizon. The results update instantly with a visual chart and a detailed table you can use for budgeting, trade-in planning, or comparing vehicle types before you buy.
How car depreciation works
Depreciation is the difference between what you paid for a car and what it's worth at any given moment. Unlike a house, a car is a depreciating asset — its value falls every year, with the steepest drop happening early in ownership.
This tool uses a declining-balance method, where each year's loss is calculated as a percentage of the remaining value — not the original price. That means the dollar amount of depreciation falls over time, but significant value continues to leave the vehicle for many years.
**Standard depreciation curve used by this tool:** - Year 1: 20% of value lost - Year 2: 15% of remaining value lost - Year 3: 13% of remaining value lost - Year 4: 12% of remaining value lost - Year 5: 10% of remaining value lost - Years 6-10: 8% per year of remaining value lost
A \$35,000 car loses roughly \$7,000 in year one alone. By year five, it may be worth only about \$17,000 — less than half of what was paid. These numbers align with long-running industry research from sources like Edmunds and iSeeCars.
Depreciation by vehicle type
Not all vehicles depreciate at the same rate. This tool adjusts the depreciation curve based on five vehicle categories:
**Standard (Sedan / Hatchback):** Uses the baseline curve above. Mainstream vehicles from major brands tend to follow this pattern closely. Popular models like the Toyota Camry or Honda Civic often outperform this curve due to strong resale demand.
**Luxury:** Year 1 depreciation is raised to 25%. Luxury vehicles lose value faster in the first year because the premium associated with being new fades immediately. A \$75,000 luxury sedan can lose \$18,750 in its first year of ownership.
**Electric Vehicle (EV):** Year 1 is set to 22%, with Years 2-3 at 18%. Early EV depreciation reflects technology uncertainty, rapid battery improvements in newer models, and changing government incentives that affect used-EV pricing. Some EVs from brands with strong demand (like Tesla) buck this trend, but the curve represents the broader market.
**Truck / SUV:** Year 1 is reduced to 18%. Trucks and body-on-frame SUVs historically hold their value better than cars. Strong demand from commercial users and the perception of durability keeps residuals higher in the early years.
**Sports Car:** Year 1 is 22%, Year 2 is 18%. Sports cars can depreciate quickly unless they are limited-production models. Everyday sports vehicles see high insurance and running costs, which suppresses demand on the used market.
How to use
1. Enter the vehicle's purchase price in the Purchase Price field. Use the full amount you paid or plan to pay, including taxes and fees if you want a complete picture. 2. Select the Vehicle Type that best matches your car. This adjusts the depreciation curve to reflect real-world patterns for that category. 3. Set your Annual Miles Driven. The default is 12,000, which is close to the US average. Higher mileage accelerates mechanical wear and can affect resale, but the main calculation here focuses on age-based depreciation. 4. Use the Years to Project slider to choose how far out you want to see. Drag it from 1 to 10 years. 5. Click Calculate Depreciation. Results appear immediately: a projected value, a summary grid, a line chart showing value over time, and a detailed year-by-year table.
Cost per mile explained
The cost-per-mile figure this tool produces is the depreciation component of your true driving cost. It is calculated by dividing total depreciation over the projection period by total miles driven.
For example, a \$40,000 vehicle that depreciates by \$20,000 over five years, driven 12,000 miles per year, has a depreciation cost of \$0.33 per mile. Add fuel, insurance, maintenance, and financing interest, and you get a fuller picture of what each mile actually costs.
This metric is especially useful when comparing two vehicles at different price points. A cheaper car might seem frugal, but if it depreciates at a higher rate, the total cost per mile can be similar to or worse than a more expensive model that holds its value better.
Fleet managers, rideshare drivers, and anyone who drives for work use cost-per-mile to track the true cost of vehicle ownership and make decisions about when to sell or replace a vehicle.
FAQs
Q: When does a car depreciate the most? A: The first year is always the sharpest drop. A new car loses around 20% of its value the moment it leaves the dealership and gets registered. Years two and three continue the steep slide, with a typical vehicle losing 40-50% of its original value within the first three years. Depreciation slows significantly after year five.
Q: Do electric cars depreciate faster? A: As a category, EVs have shown higher depreciation than comparable gas vehicles in recent years, largely due to rapid battery technology improvements, changing government incentives, and strong competition from newer models. However, specific brands vary widely. Some EVs from high-demand manufacturers have held value exceptionally well. The curve in this tool reflects the broader EV market average.
Q: How can I reduce depreciation? A: You cannot stop depreciation, but you can minimize its impact. Buy a vehicle with a strong resale reputation. Purchase used (let the first owner absorb year-one loss). Keep mileage reasonable. Maintain the car well and keep service records. Choose popular colors (silver, white, black, gray). Avoid unusual trims or packages that reduce the buyer pool when you sell.
Q: What is the 20% first-year depreciation rule? A: The 20% rule is a widely cited industry average for new vehicle depreciation in the first year. It means a \$30,000 car is worth roughly \$24,000 after 12 months of ownership, regardless of how little it was driven. This is primarily driven by the shift from "new" to "used" status, which immediately expands the pool of comparable vehicles and reduces perceived value.
Q: Is depreciation the same as resale value loss? A: In practical terms, yes. Depreciation is the accounting term for value reduction, while resale value is what a buyer would pay today. They refer to the same underlying number. This tool projects resale value decline using industry-standard depreciation curves, so the "Vehicle Value" in the year-by-year table represents the approximate resale value at that point.
Q: Should I factor in mileage when projecting value? A: This tool uses mileage to calculate cost per mile, but the year-by-year value projection is based on age-based depreciation curves rather than mileage-adjusted ones. High-mileage vehicles typically sell for less than low-mileage ones of the same age, so treat the projections as estimates for a vehicle driven near the average you entered.
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