This car depreciation calculator is a handy tool that will help you estimate the value of your car once it's been used. You probably know that the value of a car drops dramatically just after you buy it, and it depreciates with each year. You can use this calculator to either find out how much your car is worth or check whether the price for a used car you were offered is fair. It also helps you to estimate the most significant component of true cost of owning a car – the true yearly cost of car acquisition.
If you want to learn:
- how to calculate the depreciation of a car,
- which cars depreciate the most and the least,
- what is the true cost of owning a car, keep reading this article!
Are you interested in motorization? Check out also our lease mileage calculator! If you're looking to finance the purchase of a new recreational vehicle (RV), our RV loan calculator makes it simple to work out what the best deal will be for you. In our portal, we also have a lot of technical calculators related to motorization. You may be particularly interested in the car crash calculator and velocity calculator.
If you are rather environment-friendly, then maybe you have wondered what would be the effect of you swapping the car for a bike for, let's say, five years? Or how much additional lifespan would you get when giving up a car? How much CO₂ emission would you prevent? Try our car vs. bike calculator to answer all of these questions.
What is depreciation? – the depreciation definition
In the simplest terms, depreciation is the decrease in value. Imagine that you bought a car for $20,000. After a few years, the car is not what it used to be in the beginning. You will probably agree that selling it for $20,000 again would not be especially fair - you have some sort of a gut feeling that it is worth much less now.
Economists would say that your car has depreciated over the last few years. They would also add that the basic concept of depreciation is to reflect the reduction in value of a car over time. Moreover, they would point out that the main reasons for this reduction are factors such as car design aging, wear, and tear. The more formal definition of depreciation says that it is the method of calculating the cost of an asset over its lifespan.
How fast does the car value decrease?
You might be surprised, but the value of your car decreases to 91% of the initial market value the minute you purchase it. Why? Well, it's all in the perception of a next prospective buyer. At the moment you buy it, the car's state moves from "new car" to "used car", and even though it's been used for just for one minute, its value drops significantly.
Then, the car value continues to drop year after year. Our car depreciation calculator uses the following values (source):
- After a year, your car's value decreases to 81% of the initial value.
- After two years, your car's value decreases to 69% of the initial value.
- After three years, your car's value decreases to 58% of the initial value.
- After four years, your car's value decreases to 49% of the initial value.
- After five years, your car's value decreases to 40% of the initial value.
Our car depreciation calculator assumes that after approximately 10.5 years, your car will have zero value. Of course, you will still be able to sell it to individual buyers, but its market value will be extremely low.
In reality, each brand and model of a car loses its value at a slightly different rate; formally we say, it has its car depreciation rate. Still, you can use this calculator to show you what the value will be more or less after a certain time has elapsed.
How to calculate depreciation?
You can use this calculator in two ways:
- The first one is to input the initial car value - the new car purchase price. Then, the car depreciation calculator will automatically display the value after given periods of time listed in the previous paragraph. If you want to calculate the value after a different amount of time has elapsed (for example, after half a year or seven years), you can input a custom car age as well.
- The second method is estimating the initial value of the car. Let's assume you were offered to buy a three-year-old car for $12,000. If you input the value into the "3 years" box, the car depreciation calculator will display the initial value of the car - in this case, over $20,500. You can now compare it to the price of a brand new car. If it is higher, for example, $25,000, it seems that you have found yourself a real bargain! And if you still can't afford it, maybe think about leasing it?
Which cars depreciate the least?
The depreciation rates of various models of cars differ significantly. Some cars lose their value much faster than others. Did you know that the difference in the five-year depreciation rate between two cars can be as high as 40 percent?
The experts from an automotive research firm iSeeCars performed an extensive study to determine the depreciation rate of different vehicles. At first, they analyzed 3.6 million purchases of new cars in 2013. Then, they compared the results with more than 750 thousand transactions in which five-year-old used vehicles were sold in 2018. To make the calculations more accurate, iSeeCars adjusted used car prices from 2018 by 7 percent to 2013 dollars. Basing on that data they were able to compute the average five-year car depreciation rate of different models.
According to this particular study, the average five-year depreciation rate of vehicles in the U.S. is around 50.2 percent of their initial value. However, some models depreciate significantly faster than others.
In the table below you can see which cars depreciate the least. At the top of the list are two unquestioned kings of value manufactured be Jeep: Wrangler Unlimited and Wrangler. Both models are known for their durability and performance. They also have enduring popularity among Americans. In addition to the two Jeeps, on the list you can find mainly pickup trucks (Toyota Tacoma, Toyota Tundra, Nissan Frontier, Toyota 4Runner, Chevrolet Silverado 1500 and GMC Sierra 1500) which belong to the continually growing market segment.
|Rank||Model||Average 5-Year Depreciation Rate|
|1||Jeep Wrangler Unlimited||27.3%|
|7||Chevrolet Silverado 1500||39.7%|
|8||GMC Sierra 1500||39.9%|
|10||Ram Ram Pickup 1500||42.7%|
|Average for All Vehicles||50.2%|
Which cars depreciate the most?
The research prepared by iSeeCars enables you also to find cars that depreciate the most. On the top of the list of the vehicles that lose their value the fastest, you will find mainly alternative-fuel vehicles: Nissan Leaf, Chevrolet Volt and Ford Fusion Energy. Another group of the fastest depreciating cars is luxury sedans (BMW 7 series, BMW 6 series, Mercedes-Benz S Class and Mercedes-Benz E Class, Jaguar XJL).
The reasons why alternative-fuel vehicles lose their value relatively quickly are twofold. Firstly, the government incentives apply only to their purchasing price, and thus their resale value is lower. Secondly, the electric and hybrid vehicles technology changes rapidly, making technologies outdated relatively quickly.
The table below contains the list of ten cars that depreciate the most.
|Rank||Model||Average 5-Year Depreciation Rate|
|3||BMW 7 Series||71.1%|
|5||Ford Fusion Energi||69.4%|
|6||BMW 6 Series||68.3%|
|7||BMW 5 Series||67.3%|
|Average for All Vehicles||50.2%|
Cost of owning a car
Everybody knows buying a car is a large expense - in 2018, the industry-wide estimated average cost of a brand-new car was around $36,000. Thus it is not a surprise that for many American families motor vehicle is the second most valuable asset (after the house). This is also a reason why many people take loans to buy a car or decide to lease them.
No matter how you finance the purchase of a car, it is crucial to realize that apart from the cost of acquisition, using a car is also associated with additional costs. The most important among them are:
- registration costs,
- insurance (motor insurance),
- taxes (especially the sales tax),
- fuel costs,
- maintenance (regular service),
- parking (when on holidays, and during the rest of the year).
Remember that a kind of a specific, indirect cost of owning a car is also the depreciation of your car.
What is the total cost of car ownership?
To find the true cost of owning a car, let's look for some numbers. According to the report (Consumer Expenditures in 2017) released by the U.S. Department of Labor (Bureau of Labor Statistics), the average cost of owning and operating a motor vehicle is $9,576 per year. This value is composed of $4,054 for the acquisition of the vehicle (averaged yearly costs of depreciation, leasing payments, etc.), $1,968 spend yearly of gasoline and motor oil, and $3,554 in other costs related with owning and using of the vehicle.
Another statistics from the American Automobile Association says that the average yearly cost of owning a car is $8,849. It includes the cost of gasoline, maintenance, insurance, license and registration, loan finance charges and depreciation costs. This number, however, does not cover the cost of parking.