What is a good depreciation rate for a car?

A 'good' depreciation rate is anything below 15% per year. Vehicles like the Jeep Wrangler, Toyota Tacoma, and Porsche 911 are famous for retaining value, sometimes losing less than 10% annually. Conversely, luxury sedans can lose over 25% per year.

Do electric cars (EVs) depreciate faster?

Historically, yes. EVs have faced steeper depreciation due to concerns about battery life and rapid advancements in technology making older models obsolete. However, as EV adoption grows and battery technology stabilizes, this gap is narrowing.

Is depreciation tax deductible?

For personal vehicles, no. However, if you use your car for business, you may be able to deduct depreciation expenses on your taxes. Consult with a tax professional or refer to IRS Topic No. 510 for business use of car rules.

Does mileage matter more than age?

Generally, yes. A 5-year-old car with 20,000 miles is often worth more than a 3-year-old car with 80,000 miles. High mileage implies more wear and tear on the engine, transmission, and suspension, which scares off buyers.

When does car depreciation stop?

Depreciation never fully stops until the car reaches its 'scrap value' (usually $300-$500). However, it slows down significantly after year 5. Some classic or collector cars eventually hit the bottom of their curve and start appreciating in value.

Car Depreciation Calculator - Estimate Resale Value & Loss

Written by Marko Šinko•Category: Vehicle Specs & Maintenance

Understanding Car Depreciation

Car depreciation is the single largest cost of vehicle ownership, often exceeding the cost of fuel, insurance, and maintenance combined. Yet, it remains one of the most overlooked factors when buying a car. Simply put, depreciation is the difference between what you pay for a car and what you sell it for later.

Our Car Depreciation Calculator helps you visualize this financial reality. By estimating how much value your vehicle loses over time, you can make smarter buying decisions, plan for future trade-ins, and understand the true cost of driving that new (or used) car off the lot.

How to Use This Calculator

We've designed this tool to be simple yet powerful. Here's how to get the most out of it:

Purchase Price: Enter the amount you paid (or plan to pay) for the vehicle. Do not include taxes or fees, just the vehicle price.
Annual Depreciation Rate: This is the percentage of value the car loses each year.
- 15-20%: Standard for most mass-market vehicles (Toyota, Honda, Ford).
- 20-30%: Common for luxury vehicles (BMW, Mercedes) or cars with lower reliability ratings.
- 10-15%: Typical for high-demand vehicles like certain trucks or sports cars (e.g., Toyota Tacoma, Porsche 911).
Ownership Period: Select how many years you plan to keep the car. This helps you see the "exit value" when you're ready to sell.

Click "Calculate Depreciation" to see a clear breakdown of the Future Value (what it's worth later) and the Total Loss (how much money evaporated). The interactive chart visualizes this curve, showing the steep drop in early years.

The "20% Rule" and The Depreciation Curve

You've likely heard the saying, "A new car loses 20% of its value the moment you drive it off the lot." While this is a generalization, it's rooted in truth. New cars suffer the steepest depreciation in the first year.

Year 1: 20-30% loss. This includes the immediate "new to used" status change.
Years 2-5: 15-18% loss per year. The curve flattens slightly but continues to drop.
Year 5+: 10-15% loss per year. At this point, the depreciation curve stabilizes, which is why buying a 5-year-old car is often considered a financial "sweet spot."

For a deeper dive into vehicle values, check out our Car Value Calculator to see current market estimates.

Factors That Accelerate Depreciation

Not all cars depreciate equally. Several factors can speed up or slow down the loss of value:

1. Mileage

The average American drives about 13,500 miles per year. If your car has significantly higher mileage, its value will drop faster. Low-mileage cars command a premium on the used market.

2. Condition

Scratches, dents, worn interiors, and mechanical issues are direct deductions from your car's value. Keeping your car garaged and regularly detailed pays off at resale time.

3. Make and Model

Reputation matters. Brands known for reliability (like Toyota and Lexus) tend to hold their value better than brands with higher repair costs or lower reliability ratings.

4. Accidents and History

A car with a clean title and no accident history is worth significantly more. Even a minor fender bender reported to Carfax can diminish value by 10-15%.

Gap Insurance: Protecting Against Depreciation

Depreciation can lead to a dangerous financial situation called being "upside down" or having "negative equity." This happens when you owe more on your car loan than the car is actually worth.

If your car is totaled in an accident, insurance will only pay the current market value, not what you owe. If you owe $30,000 but the car is worth $25,000, you are on the hook for the $5,000 difference. Gap insurance covers this difference. It is highly recommended for new car purchases with low down payments.

To see if you can afford a car that holds its value, use our Car Affordability Calculator.

Strategies to Minimize Depreciation

You can't stop depreciation, but you can slow it down. Here are pro tips to protect your investment:

Buy Used: Let the first owner take the big 20-30% hit. Buying a 2-3 year old car saves you thousands in depreciation while still getting a modern vehicle.
Choose Popular Colors: Neutral colors like white, black, silver, and gray are easier to sell. Bright yellow or purple cars may find fewer buyers, lowering the resale price.
Maintain Records: Keep a folder of all service receipts. Proof of regular oil changes and maintenance builds trust with buyers and increases value.
Keep it Stock: Modifications like aftermarket spoilers, loud exhausts, or lowered suspension often lower the value of a regular car, as buyers worry about abuse.

Car Depreciation Calculator