Vehicle Depreciation Calculator
Every car loses value the moment it leaves the lot, and this vehicle depreciation calculator estimates how much will be left after a few years of ownership. It uses the declining balance method, the most common way to model how resale values actually behave: instead of subtracting the same dollar amount each year, it removes a fixed percentage of a shrinking balance, so the biggest losses happen early and the curve flattens over time. Enter the starting value of the vehicle, an annual depreciation rate that fits its make and mileage, and the number of years you plan to hold it. The tool then compounds the loss year by year and shows both the remaining value and the total dollars lost to depreciation. This is an estimate of market resale value, not tax depreciation, which follows separate IRS rules for business vehicles. Because depreciation depends heavily on the specific model, condition and local market, the rate is left as a fully editable input rather than a fixed assumption you cannot change. Every figure is computed deterministically from the standard declining balance formula shown below, with a worked example that reconciles exactly to the calculator defaults so you can follow each step yourself.
Declining balance depreciation keeps a fixed share of value each year: remaining value = starting value x (1 - rate)^years. A 30,000 vehicle losing 15% a year is worth $13,311.16 after 5 years, a total loss of $16,688.84.
Vehicle depreciation formula
Remaining value = V x (1 - r)^n
Total depreciation = V - Remaining value
V = starting value of the vehicle
r = annual depreciation rate (as a decimal)
n = number of years held
Each year multiplies the previous value by (1 minus the rate), so the dollar loss is largest at the start and shrinks as the balance falls. Raising (1 - r) to the power n applies that compounding across all the years at once.
Worked example
A car is bought for 30,000 and depreciates at 15% per year. We hold it for 5 years.
- 1 - rate = 1 - 0.15 = 0.85
- 0.85 raised to the power 5 = 0.4437053
- Remaining value = 30,000 x 0.4437053 = 13,311.16
- Total depreciation = 30,000 - 13,311.16 = 16,688.84
After 5 years the car is worth 13,311.16 and has lost 16,688.84 in value. These are the calculator's default inputs, so the result above matches the widget exactly.
Remaining value by year (30,000 at 15%)
| Year | Remaining value | Cumulative loss |
|---|---|---|
| 1 | 25,500.00 | 4,500.00 |
| 2 | 21,675.00 | 8,325.00 |
| 3 | 18,423.75 | 11,576.25 |
| 4 | 15,660.19 | 14,339.81 |
| 5 | 13,311.16 | 16,688.84 |
Illustrative resale model. Tax depreciation for business vehicles follows separate IRS rules.
Vehicle depreciation calculator: frequently asked questions
How is vehicle depreciation calculated?
This calculator uses the declining balance method: each year the vehicle keeps a fixed percentage of the previous year's value. If a car starts at 30,000 and loses 15% a year, after one year it is worth 25,500, after two years 21,675, and so on. The formula is starting value multiplied by (1 minus the rate) raised to the power of the number of years, which compounds the loss the way real resale values typically fall.
What depreciation rate should I use for a car?
Depreciation varies a lot by make, model, mileage and condition, so there is no single correct rate. New cars often lose the most value in the first year, then settle into a steadier annual decline. A rate between 10% and 20% a year is a common starting assumption for a mainstream vehicle. Because the right figure depends on your specific car and market, this calculator leaves the rate as an editable input rather than hardcoding a number.
Is this the same as IRS depreciation for taxes?
No. Tax depreciation for a business vehicle follows the Modified Accelerated Cost Recovery System (MACRS) with annual dollar limits set by the IRS, not a simple percentage of declining value. This tool estimates market resale value, which is what most buyers and sellers care about. If you are claiming a vehicle as a business asset, check the current rules and limits published by the IRS.
Why does declining balance never reach zero?
Because each year removes a percentage of a shrinking balance, the value gets smaller and smaller but mathematically never hits exactly zero. In practice a vehicle has a salvage or scrap value, and after many years the calculated figure becomes small enough that the scrap value dominates. The declining balance method is a model of typical resale behaviour, not a guarantee for any single car.
What is the vehicle depreciation formula?
Remaining value equals starting value multiplied by (1 minus the annual rate) raised to the power of the number of years. With a 30,000 car, a 15% rate and 5 years, that is 30,000 multiplied by 0.85 to the fifth power, which equals 13,311.16. Total depreciation is the starting value minus the remaining value.
Official sources
- Vehicle and asset depreciation rules for tax purposes: US Internal Revenue Service (IRS). As at 25 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 25 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.