How fast do cars depreciate?
A typical new car loses about 20% of its value in the first year and roughly 15% of its remaining value each year after that, so after five years it is worth around 40% of what you paid. Trucks and some popular SUVs and Japanese brands hold value better; luxury sedans and many electric cars have lost value faster.
Depreciation formula
Value after each later year = previous value × (1 − yearly rate)
Depreciation per mile = total value lost ÷ miles driven
Worked example
A new $40,000 car at 20% in year one and 15% a year after that is worth:
| End of year | Value | Total lost |
|---|---|---|
| 1 | $32,000 | 20% |
| 2 | $27,200 | 32% |
| 3 | $23,120 | 42.2% |
| 4 | $19,652 | 50.9% |
| 5 | $16,704 | 58.2% |
That is $23,296 lost in five years, about $4,659 a year, or 39 cents per mile at 12,000 miles a year: often more than the car's fuel cost.
How to lose less money to depreciation
- Buy two or three years old. The first owner absorbs the steepest drop.
- Choose models with strong resale value. Reliability reputation matters a lot.
- Keep mileage reasonable and keep service records.
- Keep it clean and undamaged. Condition is one of the biggest factors in trade-in offers.
- Keep it longer. Depreciation slows each year, so the cost per year falls the longer you own the car.
Financing the car? Compare what you will owe with what it is worth using the car loan calculator.
Frequently asked questions
How much does a car depreciate per year?
Roughly 20% in the first year and about 15% of the remaining value each year after that, so a typical car is worth around 40% of its price after five years. Rates vary a lot by brand and model.
How do I calculate car depreciation?
Multiply the price by one minus the first-year rate, then multiply each following year's value by one minus the yearly rate. A $40,000 car is worth about $16,700 after five years at 20% then 15% a year.
Which cars depreciate the least?
Pickup trucks, some SUVs and models with a reputation for reliability tend to hold value best. Luxury cars and models with expensive repairs usually depreciate fastest.
Does mileage affect depreciation?
Yes. Higher-than-average mileage, usually more than about 12,000 to 15,000 miles a year, lowers resale value, while low mileage helps.
More car calculators
Last updated October 2026.