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Lease vs Buy Car

Car Depreciation Calculator

Depreciation — the gap between what you pay for a car and what it's worth when you're done with it — is usually the single largest cost of owning one. A typical new car loses about 20% of its value in year one, then a smaller share of the remaining value every year after (the defaults here, documented on the methodology page). Set your price and horizon below to see the value curve, the loss each year, and what's left at the end.

Vehicle & horizon
$

Use the actual out-the-door price, not the sticker.

yrs

Depreciation is front-loaded — the first years cost the most.

Depreciation curve

Typical-shape estimates, not model-specific data — tune the two rates below to match your car.

%
%

Applied to what the car is still worth, so the yearly loss shrinks over time.

Estimated value after 8 years

$10,900

A $42,500 car is worth about $10,900 after 8 years on this curve — $31,600 (74.4%) lost to depreciation.

Total depreciation

$31,600

Share of price lost

74.4%

Average loss per year

$3,950

$0$20k$40k$60k0y1y2y3y4y5y6y7y8y
Estimated market value at each year — exact figures are in the table below.

Year-by-year value

Estimated vehicle value at each year of ownership, with the loss that year and the cumulative loss.
YearEstimated valueLoss that yearCumulative loss
New$42,500——
1$34,000$8,500$8,500
2$28,900$5,100$13,600
3$24,565$4,335$17,935
4$20,880$3,685$21,620
5$17,748$3,132$24,752
6$15,086$2,662$27,414
7$12,823$2,263$29,677
8$10,900$1,923$31,600

These are smoothed, typical-shape curves — actual resale value depends on the specific model, condition, mileage and local market. The formula and every default rate are documented on the methodology page.
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How this calculator works

The model uses a two-stage curve: the car loses the year-one rate of its price in the first year, then the later-year rate of its remaining value in every year after — so the dollar losses are front-loaded and shrink as the car ages. The presets (Gentle, Average, Steep) just set those two rates; edit either one and the curve becomes your own. Every default and the exact formula are documented on the methodology page.

That front-loaded shape is why depreciation drives so many car-money decisions: it's the invisible cost behind every lease payment and the reason a lightly-used car can be a bargain. For the full story — what drives the curve, how to slow it down, and how it feeds the lease-vs-buy math — read car depreciation explained.

Frequently asked questions

How fast do new cars depreciate?
There's no universal number, but the common rule of thumb is that a typical new car loses around 20% of its value in the first year, then a smaller share of its remaining value each year after — steepest at the start, flattening with age. Those are exactly this calculator's defaults (20% in year one, 15% of remaining value per later year), documented as editable estimates on the methodology page. Actual curves vary widely by model, condition and market.
Why does depreciation matter more than loan interest?
For most buyers, depreciation is the single largest cost of ownership — in the early years a typical car usually sheds more value than the loan charges in interest. Interest gets the attention because it's printed on the contract, while depreciation only shows up when you sell or trade in. To see the two side by side, run your numbers in the Total Cost of Ownership Calculator or the Lease vs Buy Calculator.
What makes some cars depreciate faster than others?
Qualitatively: a brand's reputation for reliability, how strong used demand is for that segment, and how many similar used cars hit the market at once (off-lease returns, rental fleet sales). Expensive options rarely hold their value, quickly-dated technology and styling accelerate the slide, and the individual car's mileage and condition matter as much as the model. The depreciation guide walks through each factor.
How does residual value relate to depreciation?
A lease's residual value is essentially the leasing company's forecast of depreciation: the predicted value of the car at lease end, set as a percentage of MSRP. The depreciation portion of a lease payment covers the drop from the agreed price to that residual — which is why slow-depreciating cars tend to make cheaper leases. See how car lease math works and the glossary for the full vocabulary.

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