Cars are famous for losing value the moment you drive off the lot — but how much, and over how many years? Our car depreciation calculator projects a vehicle’s value year by year using a compounding annual rate.
Why depreciation compounds
Each year’s loss is calculated against the previous year’s already-reduced value, not the original sticker price:
Value after year n = Purchase price × (1 − rate)ⁿThis mirrors real depreciation curves — cars typically lose a bigger dollar amount early on and a smaller (but similar percentage) amount in later years, since the percentage is applied to a shrinking base.
Picking a depreciation rate
Industry estimates commonly put average vehicle depreciation at 15-20% per year after the first year (which often sees a steeper 20-30% drop on its own). The real number varies a lot by brand reliability, market demand, and mileage — luxury and electric vehicles often depreciate faster than reliable, popular mainstream models.
Example
A $30,000 vehicle depreciating at 15% per year is worth about $13,311 after 5 years — a total value loss of roughly $16,689.
Why this matters beyond curiosity
Knowing your projected value helps with total cost of ownership comparisons between vehicles, deciding whether to sell before or after a particularly steep depreciation year, and avoiding being “underwater” on an auto loan (owing more than the car is worth).