1. What Is Car Depreciation?

Car depreciation refers to the decrease in a vehicle's value over time. Most cars lose about 20-30% of their value in the first year and about 15-18% each subsequent year. After 5 years, a car may be worth only about 40% of its original purchase price.

2. How Does the Calculator Work?

The calculator uses the compound depreciation formula:

Where:

• \( Original \) — Original purchase price of the car
• \( Rate \) — Annual depreciation rate (as decimal)
• \( 5 \) — Number of years

Explanation: The formula calculates the remaining value after applying the depreciation rate each year for 5 years.

3. Understanding Depreciation Rates

Details: Depreciation rates vary by vehicle make, model, and market conditions. Luxury cars typically depreciate faster than economy cars. Average rates range from 0.15 to 0.25 (15% to 25% per year).

4. Using the Calculator

Tips: Enter the original purchase price in USD and the annual depreciation rate as a decimal (e.g., 0.20 for 20%). The calculator will show the estimated value after 5 years.

5. Frequently Asked Questions (FAQ)

Q1: Why does a new car depreciate so quickly?
A: The biggest drop occurs when a new car becomes a used car (immediately after purchase). Additional factors include model updates, wear and tear, and market demand.

Q2: Which cars depreciate the slowest?
A: Generally, trucks, SUVs, and certain reliable brands (Toyota, Honda) hold their value better than luxury or niche vehicles.

Q3: Can I reduce my car's depreciation?
A: Proper maintenance, keeping mileage low, and avoiding modifications can help maintain value, but depreciation is inevitable.

Q4: How accurate is this calculator?
A: It provides a general estimate. Actual depreciation depends on many factors including market conditions, vehicle condition, and demand.

Q5: Should I consider depreciation when buying a car?
A: Yes, understanding depreciation helps make informed decisions about new vs. used cars and long-term ownership costs.