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Car Depreciation Calculator

Enter your purchase price, ownership period, and vehicle type to estimate depreciation. See year-by-year value and total loss over your ownership period.

Reviewed by Richard Ross · Last updated April 2026

How Car Depreciation Calculator works

How this calculator estimates depreciation

The calculator uses a declining-balance (reducing-value) method. Each year, depreciation is taken as a percentage of the car's current value rather than its original price. This produces the characteristic curve of rapid early loss followed by slower later decline — which matches real-world auction and part-exchange data. The first year uses a higher rate than subsequent years because new cars lose value the moment they are driven away. Rates by vehicle type: mainstream cars lose approximately 20% in year 1 and 15% per year thereafter. Premium cars lose 25% in year 1 and 18% thereafter. EVs 15% in year 1 and 10% thereafter. Commercial vehicles 15% in year 1 and 12% thereafter.

What drives depreciation

The main factors affecting depreciation are: fuel type (EVs now hold value better than older data suggests), brand desirability, mileage relative to average (around 8,000 miles/year), service history, colour (silver, white, and black retain value better), and condition. Supply and demand also matters — manufacturers limiting production can cause cars to hold value unusually well. This calculator applies average depreciation curves. Your car may depreciate faster or slower depending on these factors.

Worked example: £25,000 mainstream car over 3 years

Purchase price: £25,000. Vehicle type: mainstream. Ownership: 3 years. Year 1: £25,000 × 20% = £5,000 depreciation. Value at end of year 1: £20,000. Year 2: £20,000 × 15% = £3,000 depreciation. Value: £17,000. Year 3: £17,000 × 15% = £2,550 depreciation. Value: £14,450. Total depreciation over 3 years: £10,550 (42% of purchase price). Average annual depreciation: £3,517. For comparison, an equivalent EV at £30,000: Year 1: £30,000 × 15% = £4,500. Value: £25,500. Year 2: £25,500 × 10% = £2,550. Value: £22,950. Year 3: £22,950 × 10% = £2,295. Value: £20,655. Total depreciation: £9,345 (31%). Higher list price, lower percentage loss.

Source: CAP HPI — UK used car market data and residual value forecasts. Motorparc data, DfT Vehicle Licensing Statistics 2025.

Frequently asked questions

How much does a car depreciate in the first year?

A mainstream car typically loses around 20% of its value in the first year. Premium and luxury cars can lose 25% or more. Electric vehicles used to depreciate fastest, but improving battery technology and demand means many EVs now lose only around 10% in year one.

Which cars hold their value best?

Electric vehicles are now among the best at holding value, alongside popular mainstream models from Toyota, Honda, and similar brands. Premium SUVs from Land Rover and Porsche also tend to depreciate more slowly. Limited-edition and performance cars can appreciate in some cases.

Does mileage affect depreciation?

Yes, significantly. Higher mileage accelerates depreciation. This calculator uses a standard declining-balance model. A car covering 20,000 miles per year will typically be worth less than the same model covering 8,000 miles per year, all else being equal.

How is depreciation calculated?

This calculator uses a declining-balance method with a front-loaded first year. Each year's depreciation is calculated as a percentage of the current value (not the original price), which reflects how real-world values drop quickly initially then slow down.

Should I buy new or used to avoid depreciation?

Buying a car that is 1-3 years old lets the first owner absorb the steepest depreciation hit. A car worth £25,000 new may be available for £18,000-£20,000 at two years old, with the same major depreciation curve ahead of it now reduced. The sweet spot is often 2-3 years old with low mileage — you get a nearly-new car without the new-car premium.

Do EVs depreciate faster than petrol cars?

Not anymore. Early EVs (pre-2021) did depreciate rapidly, partly due to uncertainty about battery life and range anxiety. Modern EVs are now among the best value-retaining vehicles. The CAP Black Book regularly places EVs like the Tesla Model 3 and VW ID.4 in the top quartile for residual values at 3 years.

How does colour affect resale value?

Colour choices matter. Silver, white, black, and grey consistently attract the widest pool of buyers and retain value best. Unusual or polarising colours (bright orange, green, yellow) can significantly reduce your car's appeal at resale. Metallic paint typically adds residual value over solid colours.

How does depreciation affect PCP finance?

In a PCP deal, the finance company sets the Guaranteed Minimum Future Value (GMFV) — the predicted value of the car at the end of the agreement. If the actual market value falls below the GMFV due to unexpected depreciation, you can hand back the car and owe nothing (subject to condition and mileage). If it exceeds the GMFV, that equity is yours to use as a deposit on the next car.

Can I claim depreciation as a business expense?

Not directly — depreciation is not an allowable deduction against business income. Instead, businesses claim capital allowances on the purchase price of vehicles. For zero-emission cars, 100% first-year allowance is available. For cars above 50 g/km CO2, writing-down allowances of 6% per year apply. Sole traders can restrict allowances to the business-use proportion.

What is the total cost of depreciation for an average UK driver?

The RAC estimates that depreciation costs the average UK car owner approximately £1,500-£3,500 per year depending on the vehicle. Over a typical 3-year ownership period, a £25,000 car loses £8,000-£12,000 of its value — making depreciation the single largest component of total ownership cost, ahead of fuel and finance.

These calculations are estimates based on 2026/27 HMRC and DVLA rates. Speak to a lender or qualified financial adviser for a personalised quote.