How to Use This Tool
Enter what you paid and how long you plan to keep it. The rates are adjustable because the defaults are only typical — they vary enormously by model.
Why it is front-loaded
Depreciation is a percentage of what the car is worth now, not of what it originally cost. So even at a constant rate the annual loss shrinks every year.
On 35,000 with 20% in the first year and 15% afterwards: 7,000 in year one, 4,200 in year two, and 2,579 in year five. Same percentage, a third of the money, because it is applied to 17,196 instead of 35,000.
The first year is worse still because a new car stops being new the moment it is registered. That step has nothing to do with condition or mileage — it is the difference between a buyer who wants a new car and one who is shopping used.
It is usually the largest cost of owning a car
Over five years the example loses 20,384, an average of 4,077 a year. For most drivers that exceeds fuel, insurance and servicing individually, and often exceeds fuel and servicing combined.
It is also the cost people ignore, because nothing invoices it. Fuel is a weekly transaction and insurance is an annual one; depreciation is only discovered on the day you sell, and by then it is a single large number that is easy to file as bad luck.
The three-year-old argument, honestly
Buying the same car at three years old for 20,230 and keeping it five years costs 11,254 in depreciation instead of 20,384. That is the strongest financial case in car buying, and it is not free:
- Repairs. You own the years where things start failing, and the factory warranty is usually gone.
- Unknown history. Service records and a proper inspection are the mitigations, and neither is a guarantee.
- Finance. Used-car interest rates are often higher, which eats into the saving.
- Missing years. You get an older car for longer, with older safety equipment and less efficiency.
The comparison here covers depreciation only. Add expected repairs to both sides before treating it as a decision.
The rates are typical, not predictive
20% then 15% is a reasonable middle for a mainstream car. Real figures range from under 10% a year for models with unusually strong demand to over 30% for cars that were heavily discounted new, sold mostly to fleets, or built by a brand with a weak reputation.
Several things move it a long way:
- Discounts when new. A car that sold at a large discount starts depreciating from the discounted price, not the list price — so the headline first-year loss is exaggerated.
- Fuel type and technology. Values have moved sharply as emissions rules and charging infrastructure changed, in both directions.
- Distance. High mileage accelerates it; this calculator does not model that, so treat the per-distance figure as an average rather than a rate.
Look up actual sale prices for the specific model and age before relying on any of this. It is arithmetic, not a valuation.
