Enter the initial car value, time the car has been owned, and the current car value into the car depreciation calculator. The calculator will display the average depreciation per year the car has undergone.
Car Depreciation Formula
The following formula is used to calculate the average percent yearly depreciation of a car.
D = [(IV – CV) / N]/IV*100
- Where D is the % deprecation per year
- IV is the initial value
- CV is the current value
- N is the number of years owned
Car Depreciation Definition
Car depreciation is a measure of the total loss of value of a car due to wear and tear.
How to calculate car depreciation?
How to calculate the depreciation on a car
- First, determine the initial value of the car
This will be the purchase price of the car or the market price of the car at the time of purchase.
- Next, determine the current value of the car
Using a website like the kelly blue book, or an appraiser, determine the current value of the car.
- Calculate the depreciation
Using the values from steps 1 and 2, as well as the total years owned, enter the information into the formula or calculator to determine the average depreciation per year.
Depreciation is a term used in finance to describe the decreasing value of an asset due to wear and usage. For example, as cars age, they become less reliable and therefore less desirable. This leads to a decrease in cost.
Through proper maintenance, any asset can hold its value better than without any work at all.
Cars depreciate because over time they become less reliable and start to break down. No one wants a car that’s going to break down, which drives down the value.