This car depreciation calculator is a handy tool that will help you estimate the value of your car once it’s been used. You probably know that the value of a car drops dramatically just after you buy it, and it depreciates with each year. You can use this calculator to either find out how much your car is worth, or check whether the price for a used car you were offered is fair. If you want to learn how to calculate the depreciation of a car, simply keep reading!
Are you interested in motorization? Check out the lease mileage calculator, too! And if you’re looking to finance the purchase of a new recreational vehicle (RV), our RV loan calculator makes it simple to work out what the best deal will be for you.
What exactly is depreciation?
Depreciation is the decrease in value. Imagine that you bought a car for $20,000. After a few years, the car is not what is used to be in the beginning. You will probably agree that selling it for $20,000 again would not be especially fair – you have some sort of a gut feeling that it is worth much less now.
How fast does a car value decrease?
You might be surprised, but the value of your car decreases to 91% of the initial market value the minute you purchase it. Why? Well, it’s all in the perception of a next prospective buyer. At the moment you buy it, the car’s state moves from “new car” to “used car”, and even though it’s been used for just for one minute, its value drops significantly.
Then, the car value continues to drop year after year. Our car depreciation calculator uses the following values (source):
- After a year, your car’s value decreases to 81% of the initial value.
- After two years, your car’s value decreases to 69% of the initial value.
- After three years, your car’s value decreases to 58% of the initial value.
- After four years, your car’s value decreases to 49% of the initial value.
- After five years, your car’s value decreases to 40% of the initial value.
Our car depreciation calculator assumes that after approximately 10.5 years, your car will have zero value. Of course, you will still be able to sell it to individual buyers, but its market value will be extremely low.
In reality, each brand and model of a car loses its value at a slightly different rate. Still, you can use this calculator to show you what the value will be more or less after a certain time has elapsed.
How to calculate depreciation
You can use this calculator in two ways:
- The first one is to input the initial car value – the new car purchase price. Then, the car depreciation calculator will automatically display the value after given periods of time listed in the previous paragraph. If you want to calculate the value after a different amount of time has elapsed (for example, after half a year or seven years), you can input a custom car age as well.
- The second method is estimating the initial value of the car. Let’s assume you were offered to buy a three-year-old car for $12,000. If you input the value into the “3 years” box, the car depreciation calculator will display the initial value of the car – in this case, over $20,500. You can now compare it to the price of a brand new car. If it is higher, for example $25,000, it seems that you have found yourself a real bargain! And if you still can’t afford it, maybe think about leasing it?