How to Calculate Depreciation Value for a Car

If you are trying to sell a used car or interested in purchasing a pre-owned vehicle you are probably interested in the depreciation value of your vehicle of choice. The depreciation value is the value of a car after a set number of years and can be determined by a simple formula used by a variety of car dealers and associations. Calculating the depreciation value of a car is not hard and takes only a few minutes.

Difficulty: Easy

Instructions

Things You'll Need:

• Pencil
• Paper
• Calculator

1. Begin by determining the salvage value of the car. This can be determined by taking 15% of the Kelly Blue Book value of the car (see resources for website). Also determine the value of the car when purchased and the Estimated Useful Life of the car.

2. Calculate the estimated useful life of the car by subtracting number of years since its production from eight (8), the typical lifespan of a car.

3. Plug the values into the following formula: Cost of car -- Salvage Value / Estimated Useful Life = Annual depreciation value. Example: $12,500 - $1,875 / 8 = $1,328 per year.

4. Take the value that you calculated in Step 2 and multiply it by the number of years since you purchased the car, then subtract that value from the purchase value of the car to get the depreciated value. Example: $12,500 - (5 years x $1,328) = $5,860.

Tips & Warnings

• Many websites offer depreciation calculators to aid in determining the current value of your vehicle, however each insurance agency or car dealership calculates depreciation a bit differently.

Resources

• Learn about your used car and its worth here