How Much Money Will Your Car Lose? Use Our Calculator To Find Out...
Are you worried about car depreciation but not sure how much value your car may have lost? Perhaps you’re thinking of selling your car and want to know how much it may truly be worth. Our Car Depreciation Calculator can help.
We’ve built our calculator to forecast any depreciation based on the average UK car depreciation levels through the first 1-5 years of ownership.
Cars don’t necessarily depreciate by the same amount each year, so using our depreciation calculator for a more accurate value of your vehicle, no matter what you decide to do next, makes sense.
Car Depreciation Quick Links
What Is Car Depreciation?
Why Is Depreciation An Issue?
What Causes Car Depreciation?
What Are The Average Car Depreciation Rates?
How To Reduce Depreciation
What Is Car Depreciation?
Car depreciation refers to the difference between the amount your car was initially worth when you first bought it and the amount it’s worth now (or on any given date, such as after one year of ownership).
The amount is usually given as a percentage, so, for example; if you buy your car for £10000 and after one year it’s worth £7500, its depreciation level would be 25%
Aside from collector cars, some sports cars and highly sought-after models, all cars suffer depreciation, so you should factor it in as a normal cost of motoring.
Why Is Depreciation An Issue?
Unfortunately, you’ll likely feel some negative impact from your car's depreciation no matter your circumstances. Whether you own your car outright, have it financed, intend to keep it forever or are looking to sell soon; depreciation and negative equity will affect your long-term situation.
Negative Equity
If your car is financed and subsequently depreciates at a greater rate than your repayments then you’ll be in ‘Negative Equity’, where you owe more than your car is worth. This can have financial implications if you decide to sell or exchange your car early, or if it’s declared a total loss.
Selling Your Car
Depreciation means you’ll get much less for your car than you paid; when you come to sell. In the best circumstances, you’ll own your car outright and depreciation only means that its resale value is lower than you’d like.
If your car is financed, however, you could face more serious financial complications if depreciation has caused negative equity. If the part exchange or resale value is lower than the amount needed to clear the existing finance balance you’ll be liable for the difference; before committing to a new car.
For example, if you have a car on Hire Purchase (HP) through a dealership, with an outstanding balance of £5000, but the dealership only values the car at £3000 as a part exchange, you’ll need to make up the £2000 difference. Dealerships and finance companies may be willing to ‘roll’ your negative equity into a new vehicle through refinancing (also known as a ‘Negative Equity Loan’) but this can become extremely expensive.
Bought your car on PCP? For more information read our article: Common PCP Mistakes (That Could Cost You Money)
Being Involved In A ‘Write Off’
A ‘write off’ or ‘total loss’ is declared by your insurer when your car is involved in an incident (such as an accident, fire or theft) and it’s deemed beyond salvage; whether it’s unrecoverable (through theft) or repairing it is too expensive.
When this happens your insurer will pay a final settlement figure that represents the value of the vehicle at the time; not the amount you may still owe, or be expecting, thanks to depreciation.
If you’re in negative equity the amount your insurer settles for will be less than you paid for your car or the amount you may still owe. This means that you’ll be liable to make up the difference.
What Causes Car Depreciation?
Make & Model
The make and model of your car will affect the level of depreciation your car experiences if, for example, it’s a brand or model known for reliability issues. The scarcity of used models, plus the manufacturer's residual value strategy will all play an important role in the ongoing value of your car.
Model Facelifts
If manufacturers release a new or ‘facelift’ version of your car (model) you’ll experience quicker depreciation.
Mileage
On average a car loses 20% of its value for every 20000 miles you drive. With the average mileage in the UK being 7400 miles per year, if you go over this significantly depreciation will be quicker.
Milestones such as 50000, 10000 and 150000 will all create higher levels of depreciation.
Tip: Research forums before you buy! Some cars will have known issues at certain mileage points which will usually coincide with significant depreciation. For example, if your car is known to have timing belt issues at 75000 miles, you should see a reflection of this in the resale prices of models in that mileage range.
Fuel Type
As a general rule of thumb, small-engined, economical cars will experience less depreciation over their lifetime than bigger-engined ‘gas guzzlers’; with electric vehicles (EVs) seeing the lowest depreciation levels.
The government's Zero Emission Vehicle Mandate, which takes full effect in 2035, means that petrol and diesel cars are now experiencing greater depreciation.
Safety Ratings
Cars with a low NCAP safety rating will be less desirable than similar cars that are safer. You can check the safety rating of any car using the online NCAP Safety Rating Checker, with a 5* rating being the most desirable (and less likely to experience depreciation).
Cars with outstanding manufacturer recalls may also suffer a sudden drop in value.
Service History
Incomplete service history and repeat MOT advisories all contribute to a drop in the value of your car.
Compliance
As ULEZ (Ultra Low Emission Zone), LEZ (Low Emission Zone), CAZ (Clean Air Zone) and other zones come into effect in the UK cars that aren’t compliant will ultimately suffer a faster level of depreciation.
Petrol and diesel cars need to meet Euro 4 and Euro 6 emission standards respectively at present to be compliant with most schemes in the UK.
Road Tax & Daily Running Costs
Higher road tax and daily running costs (including fuel, servicing and ongoing maintenance) will all contribute to a higher level of depreciation over time.
Number Of Owners
The more owners a car has the quicker its depreciation will be compared to a similar make and model. However, it’s worth noting that this may have been reflected in the price you originally paid for your car.
What Are The Average Car Depreciation Rates?
As we’ve discussed, depreciation levels can vary on an individual basis based on many factors. However, as a general rule will follow the depreciation rates below:
- Year One: 15-35% depreciation.
- Year Two: 35-50% depreciation.
- Year Three: Up to 50% depreciation.
- Year Four: 50-60% depreciation.
- Year Five: 60-70% depreciation.
How Much Do Electric Cars Depreciate?
We calculated the depreciation levels of the top 10 best-selling EVs (in 2022/23) which gave an average of 24.67% in the first year, rising to 36% in the second.
For more information read our article: How Much Do Electric Vehicles Depreciate?
When Do Cars Lose The Most Value
Almost all cars lose the most value in the first year of ownership, regardless of whether they are new or used.
New cars have the highest depreciation as you will pay the retail price vs the wholesale ‘trade’ price it will be worth when you come to sell it.
How To Reduce Depreciation
Whilst depreciation is pretty much inevitable, there are several steps you can take to minimise, or at least slow the rate of depreciation. Here’s a brief overview:
- Maintain Servicing
- Avoid Modifications
- Keep Your Car Mechanically Sound
- Keep A History Of Servicing & Repairs
- Maintain Bodywork Condition
- Refrain From Eating, Drinking & Smoking In Your Car
- Keep Your Car Clean & In Good Condition
- Minimise Mileage
- Keep Alloy Wheels & Tyres In Good Condition
For more information read our article: How To Improve Your Car Resale Value