Reducing balance versus straight line
Most cars lose a percentage of their remaining value each year, which is reducing-balance depreciation. The first year is the biggest drop, and the losses shrink as the car gets older.
Straight-line depreciation takes the same amount every year. It is simpler but rarely matches how the market prices used cars.
Worked example
A £30,000 car losing 15% a year on a reducing balance is worth £15,660.19 after 4 years. The total depreciation is £14,339.81, or 47.8% of the price.
The first year alone accounts for £4,500 of the loss, and the average loss is £3,584.95 a year.
Why it matters for a loan
If the loan balance falls more slowly than the car's value, you are in negative equity. That is why a long term with a small deposit is risky.
Compare the projected value with the balance at the same date before choosing a term.
Inputs for the car loan depreciation calculator
Price when new
What the car cost when new, or its value today if you are projecting forward.
Years of ownership
How many years you expect to keep the car.
Yearly depreciation rate
The share of value lost each year.
How value falls
Reducing balance is typical; straight line loses the same amount each year.
CALCULATOR QUESTIONS
Car loan depreciation calculator questions
What is a normal depreciation rate?
New cars commonly lose 15% to 25% in the first year, then around 10% to 15% a year.
How much is a £30,000 car worth after 4 years?
£15,660.19 at 15% reducing balance, a loss of 47.8%.
Does mileage affect it?
Yes. High mileage and poor condition reduce value faster than the age-based average.
Why does the first year cost most?
The car becomes used as soon as it is registered, which is the largest single drop in value.