A brand-new car is one of the fastest-depreciating assets most people will ever buy. The moment you drive it off the dealer's lot, it has already lost a chunk of value, and that loss continues every year you own it. This car depreciation calculator projects your vehicle's resale value year by year using the industry-standard used-car market curve — about a 20% hit in Year 1, 15% per year in Years 2 and 3, and 10% per year from Year 4 onward — so you can see exactly how much of your purchase price will be left when it is time to sell or trade in.
Type in the new-car price, choose how many years you plan to keep it, and the result card shows the estimated resale value, the total dollar loss, the value retained as a percentage, and a full year-by-year schedule. The default rates are the textbook averages, but you can override each tier if you know your specific make, model, or market depreciates faster or slower.
How to Use
- Enter the New Car Price (MSRP) — the price the vehicle had when it was brand new. If you bought it used, enter the price on the window sticker at launch, not what you paid.
- Set Years Owned to how many years you have held (or plan to hold) the car. Zero years simply returns the original price, which is a useful sanity check.
- Review Year-1 Value Loss. The default is 20%, which matches the widely cited rule that a new car loses roughly a fifth of its value in its first year.
- Adjust Years 2–3 Value Loss if you expect slower or faster mid-life wear; the default is 15% per year applied to the remaining value, not the original price.
- Set Years 4+ Value Loss for the older-vehicle tier; the default is 10% per year. Luxury EVs and heavy-duty trucks may sit outside this range, so tune the sliders to match reality.
- Read the result card: Estimated Resale Value is the headline number, Total Value Lost is what you have already burned, and Value Retained tells you what fraction of the original price is still on the odometer.
The math is straightforward compounding on the declining balance. Each year's percentage is applied to whatever the car was worth at the start of that year, not to the original sticker price. That is why the biggest dollar loss almost always lands in Year 1, and why the annual loss shrinks over time even though the car is still worth less every year.
The Used-Car Depreciation Curve
Industry analysts at firms such as Edmunds, Kelley Blue Book, and AAA converge on a rough shape for a typical non-luxury vehicle:
- Year 1: about 20% down. The instant a car leaves the dealership it becomes a "used" car, and the market marks it down sharply. On a $40,000 car that is an immediate $8,000 loss, leaving roughly $32,000.
- Years 2 and 3: about 15% per year. Now the car is in its sweet spot as a reliable used vehicle. It loses 15% of remaining value each year: $32,000 becomes $27,200, then $23,120.
- Years 4 and 5: about 10% per year. Depreciation slows as the car approaches the high-mileage, out-of-warranty zone. $23,120 becomes $20,808, then $18,727.
After five years, that $40,000 car is worth about $18,727 — roughly 46.8% of its original price, meaning the owner has absorbed about $21,273 of depreciation. That is the single largest "cost of ownership" line, larger in most years than fuel, insurance, or maintenance.
Luxury brands (BMW, Mercedes-Benz) and battery-electric vehicles tend to depreciate faster than the average, especially in Year 1. Economy brands (Toyota, Honda, Subaru) and pickup trucks often hold value better and may lose only 15–18% in Year 1. Use the sliders to nudge the rates up or down for your specific model.
Why This Matters
Depreciation is a silent expense because you never see a bill for it at the pump or in your insurance envelope. But it is the number that decides whether you are underwater on your auto loan the day you drive home. If you financed 110% of the MSRP with zero down, a 20% Year-1 loss means you owe more than the car is worth before the first oil change.
Understanding the curve also changes buying decisions:
- Buying two or three years old lets someone else absorb the brutal Year-1 hit. A three-year-old car on the 20/15/15 curve retains about 58% of its new price — you get most of the remaining useful life for a fraction of the original outlay.
- Keeping the car past Year 5 is where owners win. Annual depreciation has slowed to ~10%, and the gap between the resale value and the cost of a replacement new car widens.
- Leasing vs. buying is fundamentally a bet on who eats the depreciation. A lease payment is mostly the leasing company's expected Year-1-to-Year-3 loss, bundled into a monthly bill.
Examples
Example 1 — The default $40,000 sedan. New price $40,000, kept 5 years at the standard 20% / 15% / 15% / 10% / 10% curve. Year 1 drops it to $32,000, Year 2 to $27,200, Year 3 to $23,120, Year 4 to $20,808, and Year 5 to $18,727.20. Total depreciation over five years is $21,272.80, and the car has retained about 46.8% of its original value.
Example 2 — The one-year lease turn-in. A $55,000 luxury SUV loses 25% in Year 1 (luxury penalty), then 18% in Year 2. After 2 years the value is $55,000 × 0.75 × 0.82 = $33,825 — a loss of $21,175 in just 24 months. This is exactly the gap a lease contract prices into your monthly payment.
Example 3 — The $1,200,000 supercar. Even at the standard curve, a high-value vehicle scales linearly: after 5 years it is worth $1,200,000 × 0.468 = $561,816, having shed $638,184 on paper. The calculator handles magnitudes well into seven figures without any rounding surprises.
Example 4 — Buying used on purpose. Skip Year 1 entirely. Let the original owner absorb the 20% hit on that $40,000 car. You buy it at the one-year mark for $32,000, keep it four more years through the 15%/15%/10%/10% tail, and your resale at Year 5 (your Year 4) is about $20,808. Your personal depreciation over four years is roughly $11,192 — less than the original owner lost in twelve months.
FAQ
How much does a new car depreciate in the first year?
On average, about 20%. A $40,000 car is worth roughly $32,000 by the time it has 1,000 miles on the odometer. Luxury brands and EVs can lose 25–30% in Year 1; economy sedans and pickup trucks often hold closer to 80–85%.
What is the average car depreciation per year?
After Year 1, most cars lose about 15% of their remaining value in Years 2 and 3, then slow to roughly 10% per year from Year 4 onward. Because the percentage applies to a shrinking balance, the dollar loss is largest in Year 1 and gets smaller every year after that.
How much is my car worth after 5 years?
Using the standard 20% / 15% / 15% / 10% / 10% curve, a typical car retains about 46–47% of its original price after five years. On a $40,000 car that is roughly $18,700. Enter your own MSRP and years-owned figure above for a tailored estimate.
Is it better to buy new or used?
Buying used at two to three years old lets the original owner absorb the steepest depreciation years. You still get most of the factory warranty and reliable service life, but you pay 30–45% less than the original buyer. The trade-off is a shorter remaining ownership window before major repairs begin.
Which cars depreciate the fastest?
Battery-electric vehicles and luxury European sedans traditionally depreciate fastest, sometimes 30% or more in Year 1, because of rapid battery-tech turnover and large dealer incentives. Pickup trucks, Toyota and Honda models, and popular enthusiast cars tend to hold value the best.
Does mileage affect depreciation?
Yes. The curve above assumes an average of about 12,000–15,000 miles per year. A car driven 25,000 miles annually will be worth less than the schedule predicts, while a garage-kept low-mileage example will be worth more. Adjust the Year-2+ rate upward for high-mileage cars and downward for low-mileage ones.
When does a car stop depreciating?
Never fully, but the curve flattens. After about 10 years, most cars are worth only their running condition, and year-to-year value changes are small and driven more by mileage, accidents, and maintenance history than by age.
Disclaimer
This car depreciation calculator is provided for informational purposes only and does not constitute financial, automotive, or appraisal advice. The 20% / 15% / 10% default curve is an industry average; actual resale values vary widely by make, model, trim, mileage, condition, location, color, and market demand. Always confirm a vehicle's true worth with a live Kelley Blue Book, Edmunds, or dealer appraisal before buying, selling, or trading in.