*Note: These figures are estimates based on standard industry averages (15% annual depreciation and $0.10/mile adjustment).
Understanding Car Depreciation
Car depreciation is the difference between the amount you spent when you bought your vehicle and the amount you get back when you sell or trade it in. For most car buyers, depreciation is actually the single largest expense of owning a vehicle, often exceeding the cost of fuel, insurance, or maintenance.
How Car Depreciation is Calculated
While every vehicle is different, most cars follow a similar downward curve in value:
The Immediate Drop: As soon as you drive a new car off the lot, it typically loses 10% to 20% of its value instantly.
The First Year: By the end of year one, a car may have lost 20% to 30% of its original MSRP.
Subsequent Years: On average, a vehicle loses about 15% of its remaining value per year for years two through five.
Factors That Accelerate Depreciation
Several variables influence how quickly your car loses its resale value:
Mileage: The more you drive, the lower the value. High mileage suggests more wear and tear on the engine and suspension.
Condition: Dents, scratches, interior stains, and mechanical issues significantly lower the trade-in price.
Number of Owners: A vehicle with many previous owners is often perceived as less reliable than a one-owner vehicle.
Brand Reputation: Brands like Toyota and Honda typically retain value better than luxury brands or discontinued models.
Example Calculation
If you purchase a vehicle for $30,000 and keep it for 3 years, driving an average of 12,000 miles per year, here is how the math usually looks:
Year 1 (20% loss): $30,000 – $6,000 = $24,000 remaining
Year 2 (15% loss): $24,000 – $3,600 = $20,400 remaining
Year 3 (15% loss): $20,400 – $3,060 = $17,340 remaining
Total Value Lost: $12,660 (42.2% of purchase price)
Tips to Minimize Your Loss
While you can't stop depreciation entirely, you can slow it down by keeping detailed maintenance records, parking in a garage to protect the paint, and choosing vehicles in popular colors (white, silver, black) which tend to be easier to resell.
function calculateDepreciation() {
var price = parseFloat(document.getElementById('purchasePrice').value);
var age = parseFloat(document.getElementById('carAge').value);
var mileage = parseFloat(document.getElementById('mileage').value);
var conditionMultiplier = parseFloat(document.getElementById('vehicleCondition').value);
if (isNaN(price) || price <= 0) {
alert("Please enter a valid purchase price.");
return;
}
if (isNaN(age) || age < 0) { age = 0; }
if (isNaN(mileage) || mileage 0) {
// First year hit
estimatedValue = estimatedValue * 0.80;
// Years 2 through N
if (age > 1) {
var remainingYears = age – 1;
estimatedValue = estimatedValue * Math.pow(0.85, remainingYears);
}
}
// Mileage Adjustment: Industry standard is ~12,000 miles per year.
// Deduct $0.10 for every mile over average.
var standardMileage = age * 12000;
if (age === 0 && mileage > 0) { standardMileage = 0; } // New cars
var excessMileage = mileage – (age > 0 ? standardMileage : 0);
if (excessMileage > 0) {
estimatedValue = estimatedValue – (excessMileage * 0.10);
} else if (excessMileage 0) {
// Slight bonus for low mileage (5 cents per mile under)
estimatedValue = estimatedValue + (Math.abs(excessMileage) * 0.05);
}
// Condition Adjustment
estimatedValue = estimatedValue * conditionMultiplier;
// Floor value (car is rarely worth less than 5% scrap value unless totaled)
if (estimatedValue < (price * 0.05)) {
estimatedValue = price * 0.05;
}
var totalLoss = price – estimatedValue;
var percentRetained = (estimatedValue / price) * 100;
// Display Results
document.getElementById('currentValue').innerHTML = "$" + estimatedValue.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('totalLoss').innerHTML = "$" + totalLoss.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('percentRetained').innerHTML = percentRetained.toFixed(1) + "%";
document.getElementById('resultArea').style.display = 'block';
// Scroll to results
document.getElementById('resultArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}