Vehicle Depreciation Calculator

Straight-line and reducing-balance value decay for a vehicle, year by year

A vehicle's value doesn't decline in a straight line in the real world — it drops fastest in the first few years and slows down later — which is exactly why comparing a straight-line depreciation estimate against a reducing-balance one matters for anyone trying to understand what a car will actually be worth at resale time.

Straight-line vs. reducing-balance — two different shapes of decline

Straight-line depreciation loses the same fixed rupee amount every year, spreading the total value loss (purchase price minus salvage value) evenly across the vehicle's useful life — simple to calculate, but not a realistic model of how cars actually lose value. Reducing-balance depreciation instead loses a fixed percentage of the current (already-depreciated) value each year, which means the rupee amount lost is largest in year one and shrinks every year after — this more closely matches real-world resale patterns, where a new car loses a disproportionate chunk of its value in the first couple of years before the rate of loss slows. Neither method involves financing or loan interest — this is purely a value-decay calculation, separate from any car loan repayment schedule.

A worked example

The same vehicle, same purchase price, and same number of years produces two different value estimates depending on which method is used — straight-line shows a steady, predictable decline year over year, while reducing-balance shows a steep early drop that tapers off, and the reducing-balance estimate is generally the more realistic one for predicting actual resale value in the first few years of ownership.

How this connects to your other vehicle costs

Depreciation is a real cost of ownership even though no cash changes hands for it directly — for the full picture of what a vehicle actually costs to run day to day, pair this with the Fuel Cost Calculator and Running Cost Comparison, and remember that depreciation, fuel, token tax, and maintenance together — not any single line item alone — determine true total cost of ownership.

Common mistakes

The most common mistake is applying a straight-line estimate to predict near-term resale value, which tends to overstate what an almost-new car will actually fetch after just a year or two — reducing-balance is the more realistic method for early-ownership resale estimates specifically because it captures the steep initial value drop that straight-line smooths away.