How it works
The first decline applies once, in the first year of your projection. The later decline compounds on the previous year’s remaining value. A 12% annual decline therefore removes fewer dollars each year as the modeled value gets smaller. The chart and table show the same calculation.
A used car does not start depreciating anew when you buy it. Enter its current purchase or supported market value as the starting value, then choose assumptions for your upcoming ownership period. The default 18% and 12% declines are illustrative scenarios, not measured averages or make-specific forecasts.
The formula behind the estimate
Every result starts with a defined model and visible assumptions.
V₀ = starting value Vₜ = V₀ × (1 − first decline/100) × (1 − annual decline/100)^(t−1) Total depreciation = starting value − ending value
A worked example
Start with a $30,000 value and assume a 20% decline in the first projected year, followed by 10% annually. The modeled values are $24,000 after year one, $21,600 after year two, and $19,440 after year three. Total modeled depreciation is $10,560. Actual sale proceeds may be higher or lower.
Choose assumptions for the car you will actually own
Age alone cannot explain every price difference. Mileage, condition, accident history, service documentation, options, powertrain, supply, and local demand all matter. A generic curve cannot capture a shortage, a discontinued model, a costly mechanical pattern, or a change in incentives for new vehicles. That is why the percentages remain editable.
For a practical budget, begin with the price you are likely to pay rather than the seller’s first asking price. Compare older examples with a similar trim and expected odometer reading. Listings are asking prices, not confirmed transaction prices, but they can reveal when a proposed residual is implausibly optimistic.
Use the curve to compare ownership periods
A one-year purchase can be sensitive to transaction costs as well as value loss. Sales tax, registration, dealer fees, and selling costs are not included here. A longer ownership period may spread those costs over more years, but maintenance exposure can increase. Send your chosen residual to a full ownership-cost comparison before deciding.
At zero projected years, the result equals the starting value. A 100% first-year decline produces zero modeled residual. Negative depreciation rates are not supported, so this tool does not model appreciation. A collectible vehicle or unusual market is a reason to seek specialist comparables rather than force a standard curve to fit.
Questions worth asking
Are the default rates based on live prices?
No. They are transparent planning assumptions. The tool has no vehicle listing feed, transaction database, or appraisal integration.
Which price should I enter for a used car?
Use its current value or expected purchase price. The first-year percentage then applies to the next year you own it, not the original year of manufacture.
Can a vehicle lose more than these estimates?
Yes. Condition changes, accidents, repairs, demand, and local market conditions can produce losses a smooth curve does not predict.
Does depreciation include loan interest?
No. It is the difference between starting and ending vehicle value. Interest and operating costs belong in a separate ownership-cost budget.
Why does the dollar loss shrink over time?
The annual percentage is applied to a declining balance. The same percentage of a smaller value is a smaller dollar amount.
This is general information, not personalized financial advice. Read the limitations.
