Understanding car depreciation
Depreciation is the difference between what you paid for a car and what you can sell it for. It’s typically the biggest single cost of car ownership — yet it’s the cost most people overlook when budgeting.
The calculator above shows depreciation as part of your full ownership cost. Adjust the depreciation percentage to match your specific car’s expected value loss.
Typical UK depreciation rates (3 years)
| Category | Typical 3-year depreciation |
|---|---|
| New luxury car | 50–65% |
| New family car | 40–55% |
| New electric car | 35–50% |
| Nearly new (1 year old) | 30–40% |
| Used (3 years old) | 25–35% |
How to reduce depreciation’s impact
Buy nearly new. A 12–18 month old car has taken the steepest part of the depreciation curve. You get a car that’s effectively still new but has lost 20–25% of its value already.
Choose well-regarded brands. Toyota, Honda, and Porsche consistently outperform the market on residuals. Luxury European brands (BMW, Mercedes, Audi) tend to depreciate faster.
Keep mileage reasonable. High mileage accelerates depreciation. If you’re doing 20,000+ miles/year, the car’s residual value will suffer disproportionately.
Maintain a full service history. A complete FSH from approved workshops makes a significant difference at sale time.
Consider GAP insurance. If you’re financing a new car, GAP insurance covers the difference between the car’s current market value and what you still owe if it’s written off.
Reduce your car costs
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