Car Depreciation Calculator To Calculate Future Value

Car Depreciation Calculator Sign

This Car Depreciation Calculator will calculate the annual, total, and lifetime depreciation costs of buying a new or used vehicle.

You might be shocked at how much these depreciation costs add up throughout your lifetime -- not to mention how much of your potential future wealth you will forfeit in the process.

If you would like to estimate all costs associated to buying and owning a vehicle (depreciation plus tax, license, finance charges, gasoline, insurance, maintenance, repairs, etc.), be sure to visit the Car Buying Calculator.

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Car Depreciation Calculator

Calculate vehicle depreciation in terms of what it will cost you, including foregone interest earnings.

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Selected Data Record:

A Data Record is a set of calculator entries that are stored in your web browser's Local Storage. If a Data Record is currently selected in the "Data" tab, this line will list the name you gave to that data record. If no data record is selected, or you have no entries stored for this calculator, the line will display "None".

DataData recordData recordSelected data record: None
PurchasePurchasePurchase pricePurchase price of car:

Purchase price of car:

Enter the purchase price of the car you own or are looking at buying. Enter without any dollar signs or commas.

$
Years oldYears oldVehicle's ageVehicle's age in years:

Vehicle's age in years:

The current age of the vehicle in number of years. If the car is new, enter a zero.

#
Own yearsOwn yearsYears you will ownYears you plan to own vehicle:

Own years:

Enter the number of years you plan to own the vehicle.

#
Miles/yearMiles/yearDrive miles per yearNumber of miles you will drive each year:

Number of miles you will drive each year:

Optional: Enter the average number of miles you expect to drive the vehicle each year. The calculator will use this entry to calculate the car depreciation cost per mile. Be sure to select a depreciation level (Low, Medium, High) that reflects the number miles per year. These depreciation levels can be selected in the expandable "DeprecDepreciationAccumulated depreciationAccumulated depreciation" form.

#
Cost yearsCost yearsLifetime cost yearsNumber of years to calculate lifetime costs:

Years to calculate lifetime costs:

Enter the number of years you expect to repeat the buy-sell/trade cycle. The Car Depreciation Calculator will use this figure to estimate your total depreciation and opportunity costs between now and when you no longer need a vehicle.

#
ROIROIExpected ROIExpected percent return on investments:

Expected return on investments:

Enter the annual percentage return you would expect to earn on your investments. Enter as a percentage but without the percent sign (for .06, enter 6). The Car Depreciation Calculator will use this figure to estimate your total opportunity cost between now and when you no longer need a vehicle.

%
DeprecDepreciationAccumulated depreciationAccumulated depreciation:
YearYear %Accum %
1
%
24%
2
%
35.4%
3
%
45.1%
4
%
53.3%
5
%
60.3%
6
%
66.3%
7
%
71.3%
8
%
75.6%
9
%
79.3%
10+
%
82.4%

Accumulated depreciation:

This is the accumulated depreciation rate based on the age of the car, the number of years you plan to own the car, and the annual cost of deprecation. Expand the description in this row to view and/or edit the year-by-year depreciation rates to suit your preference.

Depreciation Rates

The following chart contains the default year-to-year depreciation rates used by the Car Depreciation Calculator. Feel free to change the rates as you see fit. You can choose High, Medium, or Low (clicking a second time restores the defaults), or manually change each year's rate (enter as percentages, so for .28, enter 28). Note that the figure entered in Year 10 will be repeated for every year after if you will keep the vehicle past the point when the car turns ten years old.

0%
Final age:Final age:Final age in years:Final vehicle age in years:

Final vehicle age in years:

Based on your entries, this is how old the car will be once you are ready to sell, trade, or scrap the vehicle.

Depr cost:Deprec cost:Depreciation cost:Total depreciation cost:

Depreciation cost:

Based on your entries, this is the total depreciation cost for the number of years you plan to own the vehicle.

Resale val:Resale value:Resale value:Resale value at end of ownership period:

Resale value:

Based on your entries, this what the vehicle will be worth when you are ready to sell, trade, or scrap the vehicle.

Avg perc:Average percent:Average annual depreciation:Average annual depreciation percentage:

Average annual depreciation percentage:

Based on your entries, this is the average annual depreciation percentage. The newer the vehicle you purchase and the more often you purchase newer vehicles, the higher will be the annual depreciation cost percentage.

Avg cost:Average cost:Average annual cost:Average annual depreciation cost:

Average annual depreciation cost:

Based on your entries, this is the average annual depreciation cost (total cost divided by number of years owned). The newer the vehicle you purchase and the more often you purchase newer vehicles, the higher will be the annual depreciation cost.

Cost/mile:Cost per mile:Depreciation per mile:Car depreciation per mile:

Car depreciation per mile:

This is the average depreciation cost per mile, which is the average annual depreciation cost divided by the average number of miles you will drive the vehicle per year. If you left the "Miles per year" field blank, this line's result will be "n/a".

Life cost:Lifetime cost:Lifetime depreciation cost:Lifetime depreciation cost:

Lifetime depreciation cost:

Based on your entries, this will be your lifetime depreciation cost if you continue to purchase vehicles in a fashion similar to this vehicle (price, age, years of ownership). If you want to lower this cost you will need to either purchase newer vehicles less often or switch to purchasing older vehicles.

Lost FV:Forfeited FV:Forfeited future value:Forfeited future value:

Forfeited future value:

Based on your entries, this is the estimated future value of your investments (opportunity cost) if you invested the average annual depreciation cost. Since most of us need a car, there is no way to completely eliminate this lost future value, so the goal should be to try to reduce it as much as possible. If you want to lower this cost you will need to either purchase newer vehicles less often or switch to purchasing older vehicles.

If you would like to save the current entries to the secure online database, tap or click on the Data tab, select "New Data Record", give the data record a name, then tap or click the Save button. To save changes to previously saved entries, simply tap the Save button. Please select and "Clear" any data records you no longer need.

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Help and Tools

Learn

What depreciation is, three methods for calculating it, and steps for minimizing its cost.

What is Depreciation?

When you purchase a car, you are trading one asset (cash) for another asset (automobile). At the time of the trade, the value of the cash you traded away should be equal to the value of the automobile you purchased. In other words, no expense should occur at the time of the trade (if only that were true in all cases).

An expense occurs as the value of the automobile drops below the value of the cash you traded for it. This drop in value is called "Depreciation."

How to Calculate Car Depreciation

You can calculate car depreciation in several ways:

  • Age of vehicle.
  • Cost per mile.
  • Difference between the purchase price and the selling price (straight line).
Method #1: Depreciation Based on Age of Vehicle

This method is based on the purchase price of the vehicle, its current age, and its estimated yearly depreciation rates.

However, while the price and age of the vehicle are known values, its annual depreciation rates are speculative and vary wildly between makes and models. Therefore all we can do is to estimate the depreciation rates based on an average of all reporting agencies (they also vary wildly).

Based on my research, the consensus seems to be that new cars depreciate an average of 24% in the first year and 15% in the remaining years.

The car depreciation formula for this method is as follows:

  1. For year #1, multiply the purchase price by the first year depreciation rate and subtract the result from the price.
  2. For all remaining years, multiply the previous year's reduced value by the current year's depreciation rate, and subtract the result from the previous year's value.

So if you purchased a car for $30,000 and you want to know how much your new car will depreciate after five years, here is how you would calculate the value based on the above formula yearly depreciation rates:

Year #1 ending value = 30000 - (30000 x 0.24) = 30000 - 7200 = $22,800

Year #2 ending value = 22800 - (22800 x 0.15) = 22800 - 3420 = $19,380

Year #3 ending value = 19380 - (19380 x 0.15) = 19380 - 2907 = $16,473

Year #4 ending value = 16473 - (16473 x 0.15) = 16473 - 2471 = $14,002

Year #5 ending value = 14002 - (14002 x 0.15) = 14002 - 2100 = $11,902

And here is a car depreciation curve showing how the value of the vehicle continues to decline over time.

car depreciation curve based on age of vehicle

Of course, the above is only an estimate as the actual depreciation varies depending on which vehicle you buy, how many miles per year you drive the vehicle, and how well you take care of the vehicle.

Method #2: Depreciation Based On Cost Per Mile

As reported by the AAA, the average annual cost of owning and driving a vehicle in 2018 was $8,849 -- 40% of which ($3,540) they attributed to depreciation. And since the study was based on 15,000 miles driven per year, this would put the average depreciation cost per mile at $0.24 ($3,560 / 15,000).

Here is a little calculator I put together to help you estimate your depreciation cost per mile based on the AAA's driving costs findings.

Depreciation Per Mile Calculator
annual cost ($):
Miles per year (#):
Depreciation percent of annual cost (%):
Optional trip miles (#):
Driving cost per mile:$0.59
Depreciation cost per mile:$0.24
Depreciation cost per annual miles:$3,539.60
Trip depreciation cost:$47.19

Here again, the actual cost of depreciation will depend on many dependent factors.

Method #3: Straight Line Depreciation

This method subtracts the expected salvage value from the purchase price of the vehicle.

Based on the earlier example, if you expected to own the $30,000 vehicle for 5 years, and estimated you could sell it 5 years from now for $12,000, the straight line depreciation would be calculated as follows:

Straight Line Depreciation
Purchase price:$30,0000
Salvage value (selling price):$12,000
Depreciation expense (purchase - salvage):$18,000
Depreciation percentage (depreciation / purchase):60%
Annual depreciation (depreciation / years):$3,600

You can also use the straight line method to estimate the depreciation cost per mile, like this:

Straight Line Miles Depreciation
Purchase price:$30,0000
Salvage value (selling price):$12,000
Depreciation expense (purchase - salvage):$18,000
Beginning miles:0
Salvage miles:75,000
Depreciation miles (salvage miles - begin miles):75,000
Depreciation cost per mile (depreciation / depreciation miles):$0.24

Since numerous unknown variables come into play when estimating the cost of depreciation, the only time you will be able to determine the exact size of the expense is when you sell, trade, or scrap your vehicle. Only then will you know for sure just how much your automobile dropped in value since you purchased it.

What Are The Unknowns?

As to what variables are "unknown," they would include variables such as the economy, the price of gasoline, the number of miles you drive your car, the condition of the vehicle, and the demand for the particular make and model of the vehicle.

Considering all of these unknown variables, the goal of the car depreciation calculator is not to calculate the exact amount by which a car will drop in value.

Instead, the goal of the calculator is to provide you with a means to compare depreciation costs for various car buying scenarios and to show you how these costs, plus the forfeited potential future wealth, can add up throughout your lifetime.

The Most Expensive Car Buying Scenario

Earlier I said that when you trade cash for an automobile, it's presumed that the value of the car is equal to the amount of money that was traded for it. In reality, there is only one buying scenario where that presumption would be somewhat correct -- a scenario wherein you purchase the car from an individual.

Used-Car Instant Value Drop

If you purchase a used car from a car dealer, the value of the automobile will instantly drop in value the moment you drive the car off the lot.

That's because the auto dealer marked up the value of the used car to include a profit margin.

If you want to know just how much that drop is, immediately drive your just-purchased car to a competing dealer and ask how much cash they'd be willing to give you for the vehicle.

But wait, that drop in value is nothing compared to the decrease in value you will experience if you purchase a "new" car.

New-Car Instant Value Drop

When you purchase a "new" car, the "new" car instantaneously becomes a "used" car!

So not only will the new car's value drop by the amount of the dealer's profit margin, but it will also plummet by the reduction in the perceived value ("used" is far less appealing than "new"). Altogether, this warp-speed depreciation that occurs the moment you drive a "new" car off of the lot can run in the 10-30% range. Ouch!

If you add to that the fact that cars depreciate faster in their early years and slower in later years, buying a "new" car every 1-3 years will cost you a fortune in hyper, warp-speed depreciation, and foregone interest earnings. You can test these types of scenarios in the future car value calculator on this page, and you will see what I mean.

I know middle-income individuals who buy new, $30,000-$50,000 vehicles every 1-2 years. I could retire on what they are throwing away in depreciation and foregone interest income.

The Least Expensive Car Buying Scenario

Most financial "experts" will tell you that the key to getting the most value out of your exchange of cash for an automobile, is to purchase a car that has a low (slow) rate of depreciation (a.k.a., high resale value).

What's wrong with that advice? Well, considering that the cars that have the lowest depreciation rates also tend to have the highest sticker prices, any depreciation costs you save may be largely offset by the increased price of the car and higher insurance premiums.

If you really want to lower the depreciation cost of owning a vehicle, the key is to either buy a new car and hold on to it for an extended period of time (say 8-10 years), or to buy a slightly used car often enough to avoid the costly ongoing repairs that can come with heavily used vehicles.

Of course, if you can walk or ride a bike to work, or you have access to public transportation, you can eliminate car depreciation costs.

Adjust Calculator Width:

Move the slider to left and right to adjust the calculator width. Note that the Help and Tools panel will be hidden when the calculator is too wide to fit both on the screen. Moving the slider to the left will bring the instructions and tools panel back into view.

Also note that some calculators will reformat to accommodate the screen size as you make the calculator wider or narrower. If the calculator is narrow, columns of entry rows will be converted to a vertical entry form, whereas a wider calculator will display columns of entry rows, and the entry fields will be smaller in size ... since they will not need to be "thumb friendly".

Show/Hide Popup Keypads:

Select Show or Hide to show or hide the popup keypad icons located next to numeric entry fields. These are generally only needed for mobile devices that don't have decimal points in their numeric keypads. So if you are on a desktop, you may find the calculator to be more user-friendly and less cluttered without them.

Stick/Unstick Tools:

Select Stick or Unstick to stick or unstick the help and tools panel. Selecting "Stick" will keep the panel in view while scrolling the calculator vertically. If you find that annoying, select "Unstick" to keep the panel in a stationary position.

If the tools panel becomes "Unstuck" on its own, try clicking "Unstick" and then "Stick" to re-stick the panel.