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HoldingCost

Vehicle depreciation calculator

Project year-by-year vehicle value using a declining-balance model with a steeper first year for new vehicles.

Calculator vehicles

Logic updated April 2026

This calculator projects year-by-year vehicle depreciation using a declining-balance model. New vehicles lose roughly 15% in their first year of ownership and about 10% per year after that; used vehicles depreciate at around 10% per year throughout. Depreciation is usually the single biggest cost of car ownership — bigger than fuel, finance, or maintenance — and most buyers underestimate it.

How this is calculated

Formula 

Year 1 (new): ending = starting × (1 − 0.15) ; subsequent years: ending = starting × (1 − 0.10) ; for used vehicles, all years use the 10% rate

Step-by-step

  1. Determine whether the vehicle is new (vehicle age = 0) or used
  2. For year 1, apply 15% depreciation if the vehicle is new, 10% if used
  3. For every subsequent year, apply 10% depreciation to the previous year's ending value
  4. Track the schedule: starting value, dollar depreciation, ending value for each year
  5. Sum the dollar depreciation across all years to get total depreciation
  6. Express total depreciation as a percentage of the original purchase price
Rounding mode
ROUND_HALF_UP
Precision
20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
Logic last reviewed

Assumptions & limitations

What this calculator assumes

  • New vehicles (age 0) depreciate 15% in the first year of ownership
  • Every subsequent year depreciates the opening value by 10%
  • Used vehicles (age > 0) depreciate 10% every year of ownership
  • Market conditions and model-specific effects are not modelled
  • No mid-year acquisition adjustment — first-year depreciation is treated as a full year

What this calculator doesn’t account for

  • Uses generic averages — model-specific resale value can deviate significantly (luxury brands often depreciate faster, certain SUVs slower)
  • Does not account for high-mileage adjustments or accident history
  • Does not factor in fuel-type market shifts (e.g., diesel resale weakening, EV residuals improving)
  • Does not model a depreciation cliff at major condition thresholds (e.g., when a vehicle becomes uneconomic to repair)
  • Does not include depreciation of accessories, modifications, or extended warranties

Worked example

A buyer purchases a new $35,000 vehicle and projects depreciation over 5 years.

Input Value
Purchase price $35,000
Vehicle age 0 (new)
Projection 5 years

Year 1: $29,750 — Year 5: $19,521 — Total depreciation: $15,479 (44%)

Year 1 (new car): $35,000 × 0.85 = $29,750. Year 2: $29,750 × 0.90 = $26,775. Year 3: $24,098. Year 4: $21,688. Year 5: $19,519. The car loses 15% in year 1 alone and 44% over 5 years. Buying the same car at one year old (age 1) and holding 5 years would lose only about 41% over 5 years because every year is at the gentler 10% rate.

Frequently asked questions

How fast do cars depreciate?

New cars typically lose 15–20% in their first year, with the steepest drop happening the moment you drive off the lot. Years 2–5 average about 10% per year on the previous year's value. By year 5, a typical new car has lost 40–50% of its purchase price. The curve flattens after year 5 — depreciation slows because there's less value left to lose.

What factors affect depreciation?

Brand reputation (some brands hold value better), model popularity, fuel type (market shifts can punish or reward specific powertrains), condition and mileage, body style (utes and SUVs often hold value better than sedans), and colour (popular colours resell faster). Generic averages like this calculator uses get you within 10–15% of the real number for most mainstream models.

When does depreciation slow down?

Around the 5–7 year mark, depreciation typically flattens because the vehicle has shed most of its 'new car premium' and is now valued primarily on condition and utility. A 10-year-old car might still be worth 25–30% of its original price, and that figure drops slowly from there. Buying at year 3–5 and holding to year 10 minimises depreciation as a percentage of purchase price.

How to minimise depreciation loss?

Three options: (1) buy a year or two old to skip the first-year hit, (2) hold the car longer so depreciation amortises across more ownership years, or (3) choose models with historically strong resale value (Japanese mass-market brands often outperform, luxury European brands often underperform). Avoiding modifications, keeping service records, and managing mileage all help on resale day.

Are EVs depreciating differently?

Historically EVs depreciated faster than equivalent petrol cars due to battery uncertainty and rapidly improving new-EV options. That's converging — modern EVs hold value comparably to petrol cars in many segments, and battery longevity has proven better than originally feared. This calculator uses generic rates; for a specific EV, check recent auction or trade-in data for that model rather than relying on averages.

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