Quick confession: I'm no numbers guy by training, I just got weirdly obsessed with them. And when I ran the depreciation math on my own car, I actually felt a little sick. Because the biggest cost of owning a car isn't gas. It's not insurance. It's the value quietly leaking out of it while it sits in the driveway doing absolutely nothing.
Good news, though. Once you can do this one bit of napkin math, you'll never overpay for a car again. Let me show you the move.
The formula
Depreciation is just the drop in value, as a percentage of what you paid:
Total depreciation % = (Purchase price minus Current value) ÷ Purchase price × 100
Say you buy a car for $30,000 and three years later it's worth $17,400. That's ($30,000 minus $17,400) ÷ $30,000, which is 42% gone. About $12,600, vanished, while you were just driving to work.
The curve nobody shows you
Cars don't lose value evenly. They dump it fast early and slow down later. The steepest drop is the second you drive off the lot:
| Age | Value retained | Value lost so far |
|---|---|---|
| New (drive off lot) | ~0% | |
| 1 year | ~20% | |
| 2 years | ~31% | |
| 3 years | ~42% | |
| 4 years | ~51% | |
| 5 years | ~58% |
That first-year cliff, right around 20%, is the whole reason I buy cars that are one to two years old. You let the first owner eat the worst of it, then get a car that's basically new for a lot less. By year five a typical car has shed close to 60%.
What it looks like on a real car
Here's the curve on an actual car, the Camry, which happens to be one of the slowest-depreciating sedans out there. Real market prices by year:
| Model year | Age | Typical used price |
|---|---|---|
| 2026 | ~new | $30,200 |
| 2024 | 2 yrs | $25,995 |
| 2022 | 4 yrs | $20,995 |
| 2021 | 5 yrs | $19,295 |
| 2019 | 7 yrs | $17,499 |
Watch how the drops shrink as it ages. The gap from year two to year four is bigger than year five to year seven. A good car that already took its early hit barely moves after that, which is exactly why an older reliable model is such quiet value.
How I lose less to it
Buy two to three years used and skip the cliff. Stick to stuff that holds value: Toyotas, Hondas, trucks, SUVs. Keep the mileage and service records clean, and never touch a branded title, which craters resale for good. Run the numbers on our car depreciation calculator, check any car's real value with our value estimator, and pull its history with a free VIN check before you sign.
Frequently asked questions
How do you calculate car depreciation?
Use: (Purchase price − Current value) ÷ Purchase price × 100. For example, a $30,000 car worth $17,400 after three years has depreciated 42%, or about $12,600. Divide across the years for a rough annual rate.
How much does a car depreciate per year?
On average a new car loses about 20% in year one, then roughly 10–15% each following year — around 58–60% of its value gone by year five. Depreciation is steepest early and slows with age.
What car loses value the slowest?
Trucks, body-on-frame SUVs and reliable Japanese models like the Toyota Camry, Tacoma and 4Runner hold value best. Luxury cars and EVs typically depreciate fastest.
Is it better to buy a car 2-3 years old?
Usually yes. A 2–3 year-old car has already taken the steepest first-year depreciation hit, so you get a nearly-new vehicle at a much lower price while losing far less to future depreciation.
Denis Kataev is a serial solopreneur and the founder of ForCar. With 15+ years in software engineering and 10 years in SEO, he builds data-driven products end to end — backed by a sharp eye for design. At ForCar he mines proprietary vehicle datasets, turning raw numbers into buying advice you can actually trust.