Why Use This Calculator?
A new car loses roughly 20% of its value the moment it leaves the lot, then keeps sliding — the first three years quietly burn more money than most people's rent. This calculator shows the curve: declining-balance (how the market actually behaves) beside straight-line (how accountants model it).
The declining-balance column explains the used-car strategy: let the first owner eat the steepest drop, buy at year three or four, and sell before the age where maintenance costs outpace depreciation.
How It Works
- Enter the vehicle price, projection length, and annual decline rate.
- Compare the declining-balance value against straight-line accounting.
- Check the year-by-year table for the resale sweet spot around years 3–5.
Frequently Asked Questions
How fast do cars depreciate?
Typically 15–25% in year one and about half the original value by year three, varying widely by brand. The default 20% annual decline models the market's general behavior.
Which depreciation method should I use for taxes?
Business vehicles follow IRS MACRS schedules, not simple formulas — this calculator is for purchase and resale planning. Confirm tax treatment with an accountant.
Which cars hold their value best?
Trucks, Toyota and Honda models, and anything with cult demand depreciate slowest; luxury sedans fall fastest. Adjust the decline rate to match the specific model's reputation.
Tips & Things to Watch
- Mileage, condition, and color shift real resale values — this is the baseline curve.
- Buying a 3-year-old certified car often gets a near-new car at 60–70% of price.
- Gap insurance matters most in years 1–2, when the loan can exceed the car's value.