Estimate a vehicle's value over time using a declining annual depreciation rate.
New cars commonly average 15-20% per year; varies a lot by make and model
This uses a declining-balance model: each year, the vehicle loses a percentage of its current value (not its original price), so depreciation slows in dollar terms even at a constant percentage rate. Formula: Value = Price × (1 − rate)^years.
Real-world depreciation isn't perfectly smooth — most vehicles lose a disproportionately large chunk of value in the first year (often 20%+) and then depreciate more gradually afterward, so a single flat annual rate is an approximation of that overall curve.
Depreciation rates vary significantly by make, model, and even trim level — luxury vehicles and electric vehicles have historically depreciated faster than average, while certain trucks and off-road-oriented models often hold value better than average.
A $30,000 car depreciating at 15% a year is worth roughly $13,311 after 5 years — a total loss of about $16,689.
It's a reasonable average across many vehicle types, but actual rates commonly range from about 10% to 20%+ per year depending on the specific make and model — check resale-value data for your specific vehicle for a more precise number.
The moment a car is driven off the lot it's classified as 'used,' which triggers an immediate value drop regardless of actual condition — separate from the ongoing wear-based depreciation that continues afterward.
Not directly in this simplified model — real depreciation is also influenced by mileage, condition, and market demand, which this straightforward percentage-based estimate doesn't separately account for.