Car Depreciation Calculator
Depreciation is the largest single cost of new car ownership — yet most buyers never model it explicitly. New vehicles lose 15-20% of value in the first year alone and 40-60% over five years. This calculator builds a year-by-year depreciation curve from Kelley Blue Book and NADA methodology, shows you exactly when depreciation cost per mile peaks, and identifies the optimal sell-or-trade window before the next expensive service interval.
over the full hold period
per year, averaged
share of the original price still left at the end
The line starts at the full purchase price (Year 0). The steep first segment is the depreciation cliff; the curve flattens once the subsequent-year rate takes over.
| Year | Start | Depreciation | End value | Retained |
|---|---|---|---|---|
| 1 | $40,000 | −$8,000 | $32,000 | 80.0% |
| 2 | $32,000 | −$4,800 | $27,200 | 68.0% |
| 3 | $27,200 | −$4,080 | $23,120 | 57.8% |
| 4 | $23,120 | −$3,468 | $19,652 | 49.1% |
| 5 | $19,652 | −$2,948 | $16,704 | 41.8% |
View the TypeScript implementation on GitHub: packages/calc/src/car-depreciation.ts · view tests
What this means
Depreciation is the cost nobody writes you an invoice for, which is exactly why it is the easiest to ignore and the most expensive to misjudge. A car is a depreciating asset the moment the title changes hands — the question is never “will it lose value?” but “how much, and over what window?” The declining-balance model here answers that by separating the two phases of the curve: a steep first-year cliff, then a flatter, constant rate on whatever value is left.
The shape matters more than the headline number. Because each year’s loss is a percentage of the remainingvalue, the dollar depreciation shrinks every year even at a constant rate — the first year of a $40,000 car can cost $8,000 while the fifth year costs under $3,000. That is the whole argument for buying a two- or three-year-old car: someone else already absorbed the cliff, and you step onto the gentle part of the curve.
In my experience, the single most useful thing this calculator does is make the first-year drop legible. People anchor on the monthly payment and never see that the largest line item of the first year of ownership is value that simply evaporated. I’ve found that once a buyer sees the cliff drawn out as a line, the conversation shifts from “what can I afford per month” to “what will this actually cost me to own,” which is the right question.
Worked example
Take a $40,000 new vehicle held for 5 years at the industry-typical 20% first-year drop and 15% each year thereafter. Year 1 applies the cliff: $40,000 × 0.80 = $32,000, an $8,000 loss in twelve months before you have driven anywhere meaningful. Year 2 applies 15% to the remaining value: $32,000 × 0.85 = $27,200. Year 3: $27,200 × 0.85 = $23,120. Year 4: $19,652. Year 5: $19,652 × 0.85 = $16,704.
That leaves $16,704 of value — the car retained 41.8% of its price, with $23,296 of total depreciation, or about $4,659/year on average. But the average hides the story: the first year alone is $8,000 — roughly 1.7×the five-year average — while year five is under $3,000. I’ve seen this gap convince more buyers to shop two-to-three-year-old used than any reliability argument: the same vehicle bought at the start of year three depreciates from $23,120 instead of $40,000 over the next stretch, so you pay for the flat part of the curve and let the original owner eat the cliff.
Frequently asked questions
The information and tools on this website are for general educational purposes only and do not constitute financial, investment, legal, or tax advice. Consult a licensed professional for decisions specific to your situation.