Automobile Depreciation Calculator Estimate Vehicle Depreciation

 

Reducing Balance Method Depreciation Calculator

For a given rate of depreciation this calculator will estimate the value of an automobile along with how much the vehicle depreciated that year.

Original Vehicle Cost
Annual Depreciation Rate (%)
 
Depreciation Amount Written Down Value
Year 1
Year 1
Year 2
Year 2
Year 3
Year 3
Year 4
Year 4
Year 5
Year 5
Year 6
Year 6
Year 7
Year 7
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Year 8
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Year 11
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Year 12
Year 12

 

 

Straight Line Depreciation Calculator

Use this calculator if you know the beginning and ending value of a vehicle but want to figure out how much it costs you per year throughout the duration of ownership.

Car Purchase Price
Sale Value
Years of Ownership
Annual Depreciation

 

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Vehicle Depreciation Information

Different vehicles tend to depreciate at significantly different rates. Sports cars, for example, tend to depreciate rather rapidly, in part because they are presumed to have been driven aggressively & often require expensive maintenance sooner. Many work trucks do a much better job retaining value as the vehicles are required to do work as part of the job. Some luxury cars are highly coveted even when used, which in turn gives them a lower rate of depreciation & makes them relaatively affordable to lease rather than buy.

The Best Time to Buy

Between losses from driving off the lot & other depreciation in the first year many cars lose about a quarter of their value in the first year. The cost of depreciation tends to slow significantly in subsequent years, so if you can find a reliable car that is 1 or 2 years old it may offer a great value relative to eating the initial "drive off the lot" depreciation.

If you have taken care of your car then make sure you keep maintanence records to prove you've taken good care of the vehicle. If you are consider buying a vehicle and the price seems too good to be true make sure you use Carfax or AutoCheck. If you believe the car may have been involved in flooding, have it professionally inspected before buying.

Used Car Cycles & the Broader Economy

The used car market itself also has cycles to it. Used car values plummeted in 2008 & 2009.

After the Great Recession the United States Federal Government unveiled the Car Allowance Rebate System (CARS), which was colloquially known as the "cash for clunkers" program. The $3 billion incentive program caused many people to trade-in cars to buy or lease more fuel efficient new cars. The trade-in program retired a portion of the used car stock, which in turn lifted used car prices. Used car prices have been quite stable from the middle of 2011 through most of 2016. The demand pulled forward from the CARS program now has a glut of people trading in cars, which has pushed down trade-in values as dealers have expanded their margins on used cars.

Used car prices impact every aspect of the auto market, as the residual value of used cars determines the rate at which carmakers can lease new cars for & how much they can charge for new cars. In the first quarter of 2017 leases made up 31.06% of consumer sales. As residual car values drop, the cost of leasing must increase to account for the lower residual value. That, in turn, makes leasing a relatively less compelling option.

Visualizing Depreciation

Here is a table which highlights the hypothetical depreciation of a typical $30,000 car, though actual rates of depreciation vary by make & model. For a more precise guide, you can look up what various used cars are listed for in the Kelley Blue Book or what they have recently sold for on a marketplace listing service which displays recent prices like TrueCar.

Condition Depreciation this Time Period Total Depreciation % Depreciation from Prior Value % Depreciation from Purchase Price Total Depreciation % Ending Value
Brand New $0 $0 0% 0% 0% $30,000
Driven Off Lot $3,339 $3,339 11.13% 11.13% 11.13% $26,661
First Year (after lot) $4,080 $7,419 15.30% 13.60% 24.73% $22,581
Second Year $3,399 $10,818 15.05% 11.33% 36.06% $19,182
Third Year $2,991 $13,809 15.59% 9.97% 46.03% $16,191
Fourth Year $2,649 $16,458 16.36% 8.83% 54.86% $13,542
Fifth Year $2,379 $18,837 17.57% 7.93% 62.79% $11,163

Here are the IRS passenger automobile depreciation deduction limits from Publication 946.

Date Placed in Service 1st Year 2nd Year 3rd Year 4th & Later Years
2016 $11,160 $5,100 $3,050 $1,875
2015 $11,160 $5,100 $3,050 $1,875
2014 $11,160 $5,100 $3,050 $1,875
2013 $11,160 $5,100 $3,050 $1,875
2012 $11,160 $5,100 $3,050 $1,875
2011 $11,060 $4,900 $2,950 $1,775
2010 $11,060 $4,900 $2,950 $1,775
2009 $10,960 $4,800 $2,850 $1,775
2008 $10,960 $4,800 $2,850 $1,775
2007 $3,060 $4,900 $2,850 $1,775
2006 $2,960 $4,800 $2,850 $1,775
2005 $2,960 $4,700 $2,850 $1,675
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