Resale Value Decay Curve

Understanding Vehicle Depreciation

New cars lose 15–25% of their value in the first year and up to 60% over five years. This is why used cars 2–3 years old offer the best value: the first buyer absorbs the steepest depreciation, leaving you with a reliable vehicle at a fraction of the original cost.

When Does Depreciation Slow Down?

The steepest losses almost always happen in those first twelve months. After that, the curve tends to flatten out — which is worth noting when thinking about timing a sale or part-exchange. Many people find that holding a car between years three and five can feel like a sweet spot, though this varies quite a bit depending on the make, model, and mileage. It can help to map out the numbers visually before making any decisions.

Common Things People Overlook

One thing that catches many owners off guard is how quickly a car's value drops even when it feels nearly new. Running the numbers at the point of purchase — rather than years later — gives a much clearer picture of the true cost of ownership. One approach is to treat depreciation as an ongoing cost, much like fuel or insurance, rather than something that only matters when selling.

A worked example

Try the defaults: purchase price of 35,000, year 1 depreciation of 20, annual depreciation after yr 1 of 12, years to project of 8. The tool returns 11,442.92. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Purchase Price, Year 1 Depreciation, Annual Depreciation After Yr 1, and Years to Project. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.

The formula behind this

This calculator models vehicle depreciation using a two-stage decay curve: an initial year-one depreciation rate (y1) followed by a constant annual depreciation rate (a) for subsequent years. Results represent estimated resale values based on these assumptions and should be treated as illustrations rather than precise predictions, as actual depreciation varies by make, condition, and market conditions. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

When the result says "wait"

If the payback is longer than you expect to keep the item, the math says no. That's useful information — not everything has to earn its keep financially, but knowing when something doesn't means the decision to buy it anyway is deliberate.

What this doesn't capture

Purchase decisions rarely come down to payback alone. Reliability, time saved, enjoyment, and alternatives outside the calculation all matter. The figure gives you the money side cleanly so you can weigh it against everything else honestly.