How the estimate works
The calculator uses a declining-balance model: each year the car loses a fixed percentage of whatever it was worth at the start of that year. That produces the shape most drivers recognise, with larger losses in money terms early on and smaller ones later, because the same percentage applies to a shrinking value. The rate you enter is an assumption, not a forecast. The 15% default is a placeholder to show the mechanics.
Real markets are lumpier. Values can move with fuel prices, supply of used stock, new model launches and changes in tax or clean air zone rules. Use the model to understand scale, then refine the rate with evidence from your own market.
What drives depreciation
- Age and mileage. The two factors buyers check first.
- Condition and history. A full service record, few owners and no accident damage support value.
- Supply and demand. Plentiful used examples of the same model push prices down.
- Powertrain trends. Shifting attitudes to petrol, diesel, hybrid and electric cars move values in different directions over time.
- Specification and colour. Desirable trims and mainstream colours can be easier to sell.
- Brand reputation. Perceived reliability and running costs influence what the next owner will pay.
New, nearly new or used?
| Buy at | Depreciation exposure | Pros | Cons |
|---|---|---|---|
| New | Highest, as you absorb the steepest early losses | Full warranty, your choice of spec, known history | Largest capital cost per year |
| Nearly new | Moderate, as the first owner takes the initial drop | Often some warranty remaining, modern features | Limited choice of spec and colour |
| Older used | Lower in money terms | Lowest purchase price | Higher maintenance risk, which shifts cost to servicing |
Buying older lowers depreciation but tends to raise maintenance, so compare total cost, not one line. The main calculator lets you test both at once.
Finding a realistic rate for your car
Rather than relying on generalisations, build your own estimate. Search used listings for the same model and trim at the age you would buy and at the age you would sell, with similar mileage for your driving. Take typical asking prices and apply this formula: annual rate = 1 − (later value ÷ earlier value)1 ÷ years.
For example, if listings suggest a car worth £20,000 today typically sells for £12,000 three years older, the implied rate is 1 − 0.61/3, roughly 15.7% per year. Asking prices sit above what sellers actually receive, especially on part-exchange, so consider nudging the rate up. Trade valuation services can give a more precise figure for a specific car.
Ways to slow the drop
Habits that help
- Keep every service invoice and MOT record.
- Fix small dents and kerbed wheels before selling.
- Keep mileage in line with your plan.
- Choose popular specifications.
Habits that hurt
- Missed services and gaps in history.
- Unusual aftermarket modifications.
- Selling in a rush or at a weak time of year for your model.
- Smoking in the car and lingering odours.
Depreciation and finance
If a car loses value faster than you repay the loan, you are in negative equity: you owe more than the car is worth. That limits your options if you need to sell early. A larger deposit and a shorter term reduce the risk. See the finance guide for how different agreements distribute that risk between you and the lender.