1. What is Car Depreciation?

Car depreciation refers to the decrease in a vehicle's value over time. In the UK, cars typically lose 15-35% of their value each year, with the highest depreciation occurring in the first few years of ownership.

2. How Does the Calculator Work?

The calculator uses the depreciation formula:

Where:

• \( Original \) — Original value of the car in GBP
• \( Rate \) — Annual depreciation rate (as decimal, e.g., 0.2 for 20%)
• \( years \) — Number of years since purchase

Explanation: The formula calculates compound depreciation, where the car loses a percentage of its remaining value each year.

3. Importance of Depreciation Calculation

Details: Understanding depreciation helps with financial planning, insurance valuation, resale decisions, and lease agreements. It's particularly important for business owners who may claim capital allowances.

4. Using the Calculator

Tips: Enter the original purchase price in GBP, the annual depreciation rate as a decimal (e.g., 0.15 for 15%), and the number of years you've owned the car. Typical UK depreciation rates range from 0.15 to 0.35.

5. Frequently Asked Questions (FAQ)

Q1: Why do cars depreciate in value?
A: Depreciation accounts for wear and tear, mileage, age, market demand, and newer models entering the market.

Q2: What's the average depreciation rate in the UK?
A: Most cars lose 15-35% of their value annually, with premium brands often depreciating slower than mass-market models.

Q3: Which cars depreciate the least?
A: Generally, luxury brands (Porsche, Mercedes), electric vehicles, and limited-edition models hold their value better.

Q4: How can I reduce depreciation?
A: Maintain full service history, keep mileage low, avoid modifications, and choose popular colors/models.

Q5: Is depreciation linear or exponential?
A: Depreciation is typically exponential (compound), meaning the car loses a percentage of its current value each year, not a fixed amount.