The biggest cost of owning a car
Fuel, insurance and repairs are visible. Depreciation is not, yet for a new car it is usually the largest cost of ownership. This calculator estimates what your car will be worth after each year and turns the loss into a monthly figure you can compare with your other expenses.
The model
Cars lose value fastest at the start, then more slowly:
Value after N years = price × (1 − first-year rate) × (1 − later rate)^(N − 1)
Typical figures for a new car are 15–25% in the first year and 10–20% a year after that, depending on the brand, model, mileage and market. Used cars bought at two or three years old skip the steepest drop: set the first-year rate equal to the later rate.
Worked example: a $40,000 new car kept 5 years
With 20% depreciation in year one and 15% a year after:
- After year 1: 40,000 × 0.80 = $32,000.
- After year 5: 32,000 × 0.85⁴ ≈ $16,704.
- Value lost: $23,296, or 58.2% of the price.
- Depreciation cost: about $388 a month, more than many car insurance premiums.
Value over time
| Year | Estimated value | Share of value lost | Depreciation per month |
|---|---|---|---|
| 1 | $32,000 | 20.0% | $666.67 |
| 2 | $27,200 | 32.0% | $533.33 |
| 3 | $23,120 | 42.2% | $468.89 |
| 5 | $16,704 | 58.2% | $388.26 |
| 7 | $12,069 | 69.8% | $332.51 |
| 10 | $7,412 | 81.5% | $271.57 |
The monthly cost of depreciation falls the longer you keep the car. Keeping it for ten years costs about 40% less per month than trading in after three.
What slows depreciation
- Brand and model reputation: some trucks and Japanese brands hold value well; luxury sedans and some electric vehicles have fallen faster.
- Mileage: around 12,000–15,000 miles a year is average; much more lowers the value.
- Condition and records: a full service history and no accidents support a higher resale price.
- Color and options: neutral colors and popular trims are easier to resell.
Using the result
Add the monthly depreciation to your loan payment, insurance and fuel for the true monthly cost of a car. If you finance, compare the estimated value with your remaining loan balance: when the loan is larger, you have negative equity, which makes trading in early expensive. For the exact value of a specific car, check a pricing guide or ask for dealer and private-party quotes.