1. What is Car Depreciation?

Car depreciation is the difference between what you paid for your vehicle and what it's worth at any given point in time. It's the single largest cost of car ownership, typically accounting for about 40% of the total cost to own a vehicle over five years.

2. How Does the Calculator Work?

The calculator uses the straight-line depreciation formula:

Where:

• \( Cost \) — Original purchase price of the vehicle
• \( Salvage \) — Estimated residual value at end of useful life
• \( Life \) — Expected useful life in years

Explanation: This method spreads the depreciation evenly over the vehicle's useful life.

3. Importance of Depreciation Calculation

Details: Understanding depreciation helps with financial planning, tax deductions, insurance claims, and making informed decisions about when to sell or trade-in your vehicle.

4. Using the Calculator

Tips: Enter the original purchase price, estimated salvage value (what you expect to get when you sell it), and the number of years you plan to keep the vehicle. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is straight-line depreciation for cars?
A: While simple, it's less accurate than accelerated methods since cars typically lose value faster in early years.

Q2: What's the average annual depreciation rate for cars?
A: New cars typically lose 15-25% of their value each year for the first 5 years.

Q3: What factors affect car depreciation?
A: Mileage, condition, brand reputation, market demand, fuel efficiency, and economic conditions.

Q4: How can I minimize car depreciation?
A: Choose models with good resale value, keep mileage low, maintain the vehicle well, and avoid unusual colors or modifications.

Q5: Is depreciation tax deductible?
A: For business use, yes. Personal use depreciation isn't tax deductible in most countries.