Car Depreciation Calculator
The car, how long you keep it, and the loan against it
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Planning estimate only. Enter complete, current figures and keep an appropriate buffer for irregular or unexpected expenses.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter what you paid for the car and how many years you will keep it before selling. Those two produce the headline value; the years also drive the far more useful cost-per-year-of-use figure.
- 02
Add the miles you drive a year to see depreciation expressed per mile — the figure that makes it comparable with fuel and maintenance.
- 03
Enter the amount financed, the rate and the loan term. The page then marks the month the car's value finally overtakes the loan balance, and how wide the gap gets before then.
- 04
Leave the first-year drop at 0 unless you have a reason not to. No survey publishes a year-one rate, so the curve is smooth by default; enter your own figure and the remaining years are re-solved so the five-year total still lands on the measured rate.
- 05
Check the five-year rate itself — 41.8%, from iSeeCars' March 2026 study of more than 950,000 cars — and correct it for your segment: trucks lose 34.2% over the same five years and electric vehicles 57.2%.
Formula
The value curve compounds a constant annual retention rate derived from the measured five-year figure: retention = (1 − 41.8%) raised to the power of one-fifth, about 89.7% of value kept a year. Value at year n = price × retention to the power of n. If you impose a first-year drop, year one uses your figure and years two to five are re-solved as ((1 − 41.8%) ÷ your year-one retention) to the power of one-quarter, so the five-year total still lands on the measured rate. Depreciation per year of use = (price − value at year n) ÷ n, which is why it falls the longer you keep the car. The underwater period is every month where the loan balance exceeds the value.
Example
A $42,000 car kept ten years, driven 13,500 miles a year, with $35,700 financed at 6.39% over 69 months. The smooth curve loses 10.3% a year, so year one costs $4,309 and the car is worth $37,691; by year three it is $30,353 and by year ten $14,226 — 33.9% of what you paid, with $27,774 gone. That is $2,777 a year, or 21c a mile, which is comparable with the 13c a mile fuel costs. Sell at three years instead and the same car has cost $3,882 a year rather than $2,777. Because the $6,300 down payment outruns the first year's loss, the car is worth more than the loan from the first month, so there is no underwater period and GAP insurance would have nothing to cover — put $2,000 down instead and that changes immediately.
Definitions
- Depreciation rate
- The share of purchase price lost over a stated period. The only measured figure here is the five-year rate — 41.8% across more than 950,000 cars in iSeeCars' March 2026 study.
- Residual value
- What the car is worth at a given point. A lessor's forecast of it sets your lease payment, which is why a lease residual can be checked against a curve like this one.
- Negative equity
- Owing more on the loan than the car is worth. Common in the first years of a long loan with a small down payment, and the reason GAP insurance exists.
- Cost per year of use
- Total value lost divided by the years you kept the car. It falls every year you keep driving, because a front-loaded loss is spread across more years.
- Retail resale basis
- Prices cars actually sold for at retail, rather than estimated trade-in values. Retail sits above trade-in, so a trade-in offer will normally come in under this curve.
Good to know
The one figure with a measurement behind it
Almost everything written about car depreciation is assertion. One figure is not. iSeeCars published a five-year depreciation study on 24 March 2026 built from more than 950,000 model-year 2021 vehicles that actually sold between March 2025 and February 2026: 41.8% of the original price gone at five years. It improved by 3.8 points from the previous study's 45.6%, and the reason is instructive — the tail of the 2021-23 used-price spike normalising. When the semiconductor shortage cut new production, used values rose so far that some cars briefly depreciated almost not at all, and a two-year-old vehicle could be worth more than its owner had paid. Any depreciation figure quoted without a date attached is a figure whose author did not know that happened. What the study measures matters as much as the number. These are retail resale prices of cars that changed hands: a dealer trade-in typically comes in below them and a private sale above, so the curve is best read as the top of a realistic range if you are trading in. It is also a survivorship measurement — vehicles totalled, scrapped or never listed are not in the sample. And 41.8% is an average across every kind of car, with a spread around it wider than anything else on the subject: trucks lose 34.2% over the same five years, hybrids 35.4%, SUVs 44.9%, and electric vehicles 57.2%. On a $42,000 car the distance between the truck case and the electric case is nearly $10,000, which dwarfs any plausible difference in fuel, insurance or maintenance across the same period. Segment is a categorical fact about the car rather than a dial, so the rate itself is the thing to correct.
The year-one cliff, and what actually causes it
"A car loses about 20% the moment you drive it off the lot" is the most repeated sentence in this subject and no study supports it. No government source and no industry survey publishes a measured year-one or year-three depreciation rate; the figure appears in explainer content and calculator marketing, sourced to nothing. Which leaves a puzzle, because the sensation is real, and the mechanism behind it is worth more than the folklore. A large part of what you paid was never in the car to begin with. Sales tax on a $42,000 purchase at a 6.5% rate is $2,730, paid to the state and unrecoverable — five states charge none, and the rest vary widely. Title, registration and dealer documentation fees add several hundred more, around $813 on the figures this subject uses. Dealer margin and the new-car premium account for more still: buyers pay for a chosen specification, an untouched warranty and an odometer at zero, and none of those survive the title transfer. Together that is well over $3,500 on this car that was transaction cost rather than value. Run it through: pay $45,543 all in, and even on a perfectly smooth curve the car is worth $37,691 twelve months later — a 17% fall in outlay, of which a substantial share was never depreciation at all. Two genuine forces sit alongside: manufacturer incentives on the current model year reset what a comparable new car costs, and a second-hand buyer discounts for a maintenance history they cannot verify. Real curves are convex; the size of the convexity is simply unmeasured. That is why a smooth 10.3% a year is the honest default, and why imposing your own first-year drop re-solves the later years so the five-year total still lands on the one figure with a survey behind it.
Three years or ten, on the same car and the same curve
This is the arithmetic that should decide when you sell, and it is not the resale value. On a $42,000 car, selling at three years means $11,647 of value gone, which is $3,882 for each year of use. Keeping the identical car to ten means $27,774 gone — $2,777 a year. The car did not change and neither did the curve; only the denominator did. Because depreciation is front-loaded and years of use are not, every additional year of ownership divides the same steep early loss across more years, and the effect is large: $1,105 a year, on these numbers, for doing nothing but keeping the keys. The same arithmetic read from the other end is the entire financial case for buying used. A three-year-old version of this car is worth about $30,353 on the curve — the first owner having absorbed $11,647 of loss — and from there to year ten it depreciates roughly $2,304 a year against the $2,777 borne by the buyer who bought it new and kept it the same total length of time. What that saving is paid for with is the remaining warranty and a maintenance history you cannot see. The obvious objection is that maintenance rises with age, and it does. But it rises slowly and roughly linearly while depreciation falls steeply and geometrically, so the age at which total cost per year of ownership turns back upward is considerably later than most people's replacement instinct — usually well past the point where a car begins to feel old rather than to be unreliable. The largest discretionary decision in this whole subject is not which car you buy. It is how often.
The race between the balance and the curve
Negative equity is the intersection of two curves that fall at different speeds. A loan balance declines slowly at first, because early payments are mostly interest, and then accelerates. A car's value declines fastest at first and then flattens. Wherever the balance sits above the value, you are underwater, and only two things govern that: where the balance starts relative to the value, which is the down payment, and how quickly it falls, which is the term. That is precisely what the first two numbers of 20/4/10 are for. Financing $35,700 of a $42,000 car — a 15% deposit — keeps the value above the balance from the first month on this curve; put $2,000 down instead and it does not, and the gap can stay open for years on a long term. What that window costs is concrete rather than theoretical. A total loss or a theft is settled at the car's actual cash value, not at what you owe, so the shortfall is yours to pay on a vehicle you no longer have. GAP coverage exists for exactly that window, and its value is exactly as long as the window is open. The version that compounds is worse. Trading out of an underwater loan means rolling the shortfall into the next one, so the next car starts underwater by the amount of the last, on a longer term and a larger balance — a position far easier to enter than to leave, and the reason negative-equity balances show up so persistently in trade-in data. One caveat sharpens all of it: this curve is retail resale, and a trade-in comes in below retail. The real underwater window is therefore somewhat wider and somewhat longer than a retail curve shows, so treat any crossover month as the optimistic end of the range.
Frequently asked questions
What will my car be worth in five years?
On the measured average, about 58% of what you paid. iSeeCars published a 41.8% five-year depreciation rate on 24 March 2026, from more than 950,000 model-year 2021 vehicles that actually sold between March 2025 and February 2026. That is an improvement of 3.8 points on the previous study's 45.6% — the tail of the 2021-23 used-price spike normalising. A $42,000 car on that rate is worth about $24,400 at five years.
Do cars really lose 20% the moment you drive off the lot?
Nobody has measured it. That figure appears only in explainer content and calculator marketing with no study behind it — no government source and no industry survey publishes a year-one or year-three depreciation rate. This page will not seed a field with folklore, so its curve is smooth unless you impose a first-year drop yourself, in which case the remaining four years are re-solved to keep the five-year total honest. Real curves are front-loaded; the size of the front load is simply not known.
Which cars hold their value best?
Over five years, trucks lose 34.2% and hybrids 35.4%; the overall average is 41.8%, SUVs 44.9%, and electric vehicles 57.2%. That EV figure is the outlier and it was the segment that improved least while everything else recovered. On a $42,000 car the gap between the truck case and the EV case is nearly $10,000 — larger than any plausible difference in fuel, insurance or maintenance over the same period.
When does my car stop being worth less than the loan?
The page marks the month, and it depends almost entirely on the down payment and the term. A large deposit and a short loan can mean you are never underwater at all; a thin deposit on a 72- or 84-month loan can leave you underwater for years. Those months are the ones GAP insurance covers — a total loss while underwater leaves you paying off a car you no longer have.
Is it cheaper to keep a car longer?
Almost always, and this is the number that should decide when you sell. On the defaults, selling at three years costs $3,882 a year in depreciation; keeping the same car to ten costs $2,777 a year — $1,105 less every year for the identical car. Depreciation is front-loaded, so every extra year divides the same steep early loss across more years of use.
Should I buy a three-year-old car instead?
Financially it is the strongest argument in the whole subject. On this curve a three-year-old version of a $42,000 car is worth about $30,353 — the first owner has absorbed $11,647 of loss — and from there to year ten it depreciates about $2,304 a year against $2,777 for the buyer who bought it new. You pay for that with the remaining warranty and the unknown maintenance history.
Are these trade-in values or retail prices?
Retail resale — what five-year-old cars actually sold for. A dealer trade-in typically comes in below that and a private sale above it, so treat the curve as the top of your realistic range if you are trading in. It is also why the true-cost-of-ownership page uses a different depreciation figure entirely: AAA measures against estimated trade-in value, a different basis, and the two are deliberately never reconciled.