Car depreciation calculator
This calculator applies a declining-balance model to a purchase price and an annual depreciation rate, so a fixed percentage of the remaining value is lost each year. On a £30,000 car depreciating at 20% a year, an estimated £20,170 (67%) is lost over 5 years, leaving it worth about £9,830. There is no statutory depreciation rate here.
How does the car's value fall each year?
Each year the car loses the same percentage of whatever it is worth at the start of that year, not a fixed number of pounds. That is why the first year costs the most in cash: the car is worth the most then, so the same percentage takes a bigger bite.
As the value drops, the yearly loss shrinks too, and this declining-balance shape tracks real used-car values more closely than a flat pounds-per-year line. A heavy-mileage car or an unloved model will still fall faster than this average estimate.
What does the value look like year by year?
| Year | Value lost | Value at year end |
|---|---|---|
| 1 | £6,000 | £24,000 |
| 2 | £4,800 | £19,200 |
| 3 | £3,840 | £15,360 |
| 4 | £3,072 | £12,288 |
| 5 | £2,458 | £9,830 |
What does the worked example show?
A £30,000 car losing 20% a year is worth £24,000 after year one, a drop of £6,000. By the end of year 5 it is worth £9,830, so it has shed £20,170, about 67% of what you paid. Spread over 5 years that is roughly £4,034 a year in value alone, before a drop of fuel goes in.
Common questions
How much does a car depreciate each year?
A rough rule is that a new car loses 15 to 35 per cent in the first year and is worth around 40 to 50 per cent of its price after three years. Rates vary widely by make, mileage and demand, so treat any single figure as an estimate.
How does this calculator model depreciation?
It uses a steady declining balance: each year the car loses the same percentage of its value at the start of that year. So the cash amount lost is largest early on, when the car is worth most, and shrinks as the value falls. This matches how used values behave better than a flat pounds-per-year figure.
Why is the first year so expensive?
A car stops being new the moment it is registered, and that alone removes a significant part of its value. The biggest single drop is usually driving it off the forecourt. Buying at one to three years old lets someone else absorb that first fall in value.
Does mileage affect depreciation?
Yes, heavily. High mileage, a full set of previous keepers, or a tired interior all pull the value below the average curve. Full service history and average mileage help it hold value. This tool models the average, so adjust the rate up for a high-mileage car.
Is depreciation a real cost?
It is often the largest cost of owning a car, bigger than fuel or insurance, yet it is invisible because no one sends a bill for it. It is only felt when the car is sold. Treating it as a cost per year, as this tool does, makes it as real as any other running expense.
How does the car's value fall each year?
The model applies a declining-balance calculation, where the car loses the same percentage of whatever it is worth at the start of each year rather than a fixed number of pounds. This is why the first year costs the most in cash: the car is worth the most then, so the same percentage takes a larger bite, and the yearly loss shrinks as the value falls. It tracks real used-car values more closely than a flat pounds-per-year line.
What does the value look like year by year?
On a £30,000 car losing 20% a year, the schedule shows the value falling from £30,000 at the start to an estimated £9,830 after 5 years. Each row of the table gives the pounds lost that year and the value remaining at the end of it, so the size of the yearly drop can be seen shrinking over time.
What does the worked example show?
A £30,000 car losing 20% a year is worth an estimated £24,000 after year one, a drop of £6,000. By the end of year 5 it is worth £9,830, having shed £20,170, about 67% of the original price.
Sources & Rate Verification
Rates verified against official statutory guidance on 6 September 2026.