When purchasing or selling a car, as a vehicle owner it is important to know that as the car ages, its value also depreciates. As soon as the car is out of the showroom, its value depreciates by 5% and after 6 months by 10% or more depending on its condition. Using a car depreciation calculator can help you estimate the value of the car.
Car depreciation refers to the decrease in the value of the car from the date of purchase to the date of selling. In other words, it refers to the decrease in the value of the car depending on several factors. Owing to natural wear and tear, the value of the car depreciates over a period of time. This normal wear and tear along with other factors such as its usage, claims, damages, etc. not only impacts your car insurance premium but also its insured declared value.
Follow the below steps to know how to use car depreciation calculator
Depreciation refers to the difference in the amount you paid when buying the vehicle and the amount you receive at the time of selling the same. A car depreciation calculator is an online tool you can use to calculate the car depreciation rate; it can help you ascertain the value for your car you can get back based on its age.
Depreciation calculator can be used to assess the value of your car that will be paid in case of theft or its total loss. The calculator can also be used to ascertain the value of the car you will get on its sale.
The below types of formula can be used to calculate the depreciation rate
Cost of running the car * Days you owned the car (÷) 365 X 100% (÷) Effective life in years = lost value
Diminishing value method for calculating depreciation
Value of the car at the time of purchase X days you owned (÷) 365 X 200% effective years in life
Insurance companies determine the insured declared value of your car using the below rates as determined by the Insurance Regulatory and Development Authority of India.
| Age of the Car | Depreciation % |
|---|---|
| 6 months and below | 5% |
| 6 months to 1 year | 15% |
| 1 year to 2 years | 20% |
| 2 years to 3 years | 30% |
| 3 years to 4 years | 40% |
| 4 years to 5 years | 50% |
For specific components of the car, the rate of depreciation varies as per the below
| Car Components | Rate of Depreciation |
|---|---|
| Rubber parts/tyres and tubes/batteries | 50% |
| Paintwork | 50% |
| Fiberglass components | 30% |
| Glass components | NIL |
The older the car is, the lesser will be the value you get. Physical condition and mileage of the car are also considered.
Since parts of luxury vehicles are hard to find and are more costly, these types of cars have a higher depreciation value.
A good maintained vehicle has a lower rate of depreciation in comparison to a badly maintained car. Bodywork issues and poor interior of the car can have a great impact on its selling price.
Fewer the number of owners, better the value you will receive for the car.
You can minimize the depreciation of your car by following the below to get higher IDV or resale value for your car.
Good Maintenance: There are high chances that you will receive a higher IDV or resale value for your car if you maintain it well. Ensure that you maintain the service records too and avoid making any modifications to the car.
Purchase a High Resale Car Model: Before buying a new car, check on the resale value of the car you wish to purchase. This will give you an idea about the depreciation rate you can expect at the time of selling the car.
This type of car insurance provides coverage to third party life and property and does not cover the insured vehicle
This type of car insurance provides coverage to your vehicle as well as third party and property
This type of insurance provides coverage for your car’s damages and losses including events caused due to man made, natural calamities, and theft.
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The car depreciation rate depends on the age of the car, its mileage and the below depreciation table.
Car Age 1 year – 2 years: 20% depreciation
Car Age 2 years – 3 years: 30% depreciation
Car Age 3 years – 4 years: 40% depreciation
Car Age 4 years – 5 years: 50% depreciation
For cars above 5 years of age, the rate of depreciation is decided between the insurer and the vehicle owner.
When calculating car depreciation, many factors are considered such as its age, condition, mileage, etc. Usually, its value depreciates by 15%-18%. However, you can get an estimate by subtracting the car’s existing price from its purchase price and minus the sales tax or the fee.
There is no particular rule to confirm a per mile car depreciation cost, and it differs from vehicle to vehicle. Car depreciate cost per mile is actually the average annual depreciation cost divided by the average number of miles you will drive the vehicle per year. So, you can use this way to calculate your car depreciation per mile.
Maruti Suzuki Swift is one of the cars in India which is depreciation resistant followed by Hyundai Grand i10, For EcoSport, Maruti Suzuki Wagon R, etc.
BMW 7 series is a high end luxury car brand that has the highest depreciation value and cars by brands such as Hyundai, Volkswagen, Nissan.
Few of the reliable car brands in India are: Toyota, Lexus, Honda, Suzuki, Hyundai, Ford and Nissan among others.
Below are few of the cars that offer you good performance in the long run too
The highest resale value SUVs in India include:
