Updated June 17, 2026
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A new car typically loses about 20% of its purchase price in the first year, and roughly 15-20% each subsequent year, totaling around 50% of value lost after five years. Depreciation slows after the first year and eventually levels off.
The 30-60-90 rule for cars
A popular shorthand for depreciation: a new car loses about 30% of its value in the first 3 years, around 60% in 5-7 years, and most of the remainder in 10 years. Actual rates vary by brand, model, and condition, but this gives a useful mental model for planning.
When does a car lose the most depreciation?
The steepest drop is the moment you drive off the lot (sometimes called "drive-off depreciation") and through the first 12 months. A car that costs $35,000 new may be worth around $28,000 after one year. This is why buying a 1-3 year old used car often delivers far better value per dollar.
How to calculate depreciation on a car
Straight-line method: divide the purchase price (minus residual/trade-in value) by the years of use you expect. For a $30,000 car kept 6 years and worth $6,000 at end: ($30,000 - $6,000) / 6 = $4,000 per year in depreciation cost.
What is a good depreciation rate?
Vehicles that retain 50-60% of their value after 3 years are considered strong. Brands like Toyota, Honda, and Subaru traditionally rank well for value retention. Luxury vehicles and trucks vary widely. Check current used market prices against new MSRP for any specific model you are considering.
Depreciation and total cost of ownership
Depreciation is the biggest chunk of total cost of car ownership for new car buyers. Adding insurance, fuel, and maintenance, the true annual cost of a new car is often double the monthly payment. See the Car Payment Calculator for payment, and factor in depreciation when comparing new vs. used.
Try the Car Payment Calculator
Enter your price, down payment, trade-in, tax rate, and loan term to see your exact monthly payment before you visit the lot.