Your car starts to lose value the moment you drive it off the dealership lot. You can blame car depreciation, which is the decrease in value that most cars experience over time.

Some car depreciation is unavoidable, but you can also reduce its effects. Certain makes and models depreciate at a much faster rate than others. Also, by practicing good driving habits and keeping up with maintenance and repairs, you may be able to minimize the pace at which your vehicle depreciates.

Here’s how to determine car depreciation and how to maintain your car’s value.

Car depreciation is the loss of a vehicle’s value that occurs over time due to a number of factors, such as aging and wear and tear. You may not think about car depreciation much until you’re reselling or trading in your vehicle. But depreciation is a major cost of owning a vehicle, even though you’re not paying directly out of pocket for the expense.

Some depreciation is inevitable, no matter how well you maintain your vehicle. But it’s possible to minimize depreciation by being selective about the vehicle make and model you choose, and by properly maintaining the vehicle.

A car’s depreciation rate is driven by factors, including:

• Make and model. Not surprisingly, an in-demand make and model will hold its value better than a less popular vehicle. Brands like Toyota and Honda tend to have good resale value because they have a reputation for being reliable and low-maintenance.

• Mileage. The more you drive, the faster your vehicle will depreciate.

• Vehicle age. Your car’s value is typically less the older it is.

• Maintenance and repairs. A car in good condition that has proof of regular maintenance will retain more of its value.

• Market demands and trends. Your vehicle is only worth what someone else is willing to pay for it, so supply and demand affect a car’s depreciation rate. For example, when gas prices are high, a gas-guzzling SUV is unlikely to fetch top dollar.

According to Kelley Blue Book, a typical new car loses nearly 30% of its value during the first two years. After that, it usually slows to about 8% to 12% per year.

Though your car’s actual depreciation will vary based on your vehicle’s make and model, as well as your driving and maintenance habits, this car depreciation chart shows how much a typical $50,000 new vehicle’s value might drop each year.

Learning how to figure out depreciation on a vehicle can help you choose the best auto insurance for your situation. These are some ways that vehicle depreciation can affect your car insurance needs.

Actual cash value for comprehensive and collision claims

If your vehicle is stolen or totaled in a crash, most insurers will base your payout on the car’s actual cash value (ACV) when you file a comprehensive or collision claim. ACV is the vehicle’s market value at the time of the loss after accounting for depreciation. If your car has depreciated significantly, it will reduce the amount of your claim check.

If you have a large balance on a car loan, you may find that you owe more on the vehicle than it’s worth due to depreciation, particularly if you made a small down payment or chose a long repayment period.

In this event, you may want to buy gap insurance, which can pay the difference between your loan balance and the car’s actual cash value if it is stolen or cannot be repaired.

Some lenders require gap insurance if you’re underwater on your vehicle. Gap coverage may also be required if you’re leasing a car.

When a car is damaged in an accident, it permanently loses value — even if it’s fully repaired — because the crash appears on the vehicle’s history report. If you’re involved in an accident where you’re not at fault (or a hit-and-run crash), most states allow you to file a diminished value claim against the other driver’s insurance company. This type of claim can provide compensation for the additional depreciation of your vehicle.

If you’ve been involved in an accident, it may be worth filing a diminished value claim with the at-fault driver’s insurer, especially if you have a newer vehicle with low mileage. However, you’ll need to prove that your vehicle lost value as a result of the crash.

Learn more: Diminished value claim: How to reclaim some lost value following an accident

There are a few different methods for calculating a car’s depreciation. If you’re simply trying to figure out your vehicle’s value, the easiest approach is to use an online car depreciation calculator. However, here are some formulas you can use to calculate vehicle depreciation.

If you’re calculating depreciation for tax purposes, be sure to consult with a tax adviser.

The declining balance depreciation method, or MACRS, is typically used for vehicles used at least 50% of the time for business that were placed into service after 1986. Under this method, you’re using an accelerated depreciation schedule, which allows you to deduct more of the vehicle’s depreciation early on, when depreciation happens most rapidly. You can use IRS Form 4562 to calculate depreciation using this method.

The straight-line depreciation method is the simplest way to calculate the depreciation of a vehicle or any other asset you use for business purposes. The formula is:

(Purchase price - salvage value)/useful life in years = annual depreciation amount

To use this formula:

1. Estimate the salvage value of the vehicle, which is the amount you expect it to be worth at the end of its useful life, as well as the useful life of the vehicle in years.

2. Subtract the salvage value from the purchase price.

3. Divide the figure from Step 2 by the estimated useful life of the vehicle.

For example, suppose you pay $30,000 for a Toyota Tacoma to use in your business. You estimate its salvage value at $10,000 at the end of a useful life of five years.

($30,000 - $10,000)/5 = $4,000 annual depreciation amount

Though this depreciation formula is the simplest approach, it assumes the asset will depreciate steadily over time. With a purchase like a new vehicle that tends to lose a lot of value at the beginning then depreciate more slowly, it’s typically not the best way to calculate depreciation.

Using a car depreciation calculator can help you estimate your vehicle’s remaining value. Here are some options that can help you estimate car depreciation:

• Edmunds True Cost to Own Calculator

• Kelley Blue Book Car Depreciation Calculator

• CarEdge Car Depreciation Calculator

• iSee Cars Price My Car tool

• Everlance Vehicle Depreciation Tax Calculator (if you’re eligible to claim car depreciation as a business tax deduction)

Many major car insurance companies have similar resources on their websites.

While some tools use your vehicle identification number (VIN) to provide an estimate specific to your car, you’ll likely have to provide your vehicle’s mileage and estimate the condition of the vehicle. The more details you provide, the more accurate your estimate will be.

Depreciation is a fact of car ownership. Though you can’t change the fact that your vehicle will usually be worth less as it ages, there are some steps you can take to slow its rate of depreciation by being strategic about which type of car you choose, following a regular maintenance schedule, and practicing good driving habits.

Though you can’t entirely predict what market demands will look like several years out, you can choose a vehicle that has a good projected resale value. The average new vehicle is only worth 45% of its sticker price after five years, but Kelley Blue Book estimates that the following 2025 vehicles (listed with projected five-year resale value) are among the least depreciating cars:

1. Toyota Tacoma (64.1%)

2. Chevrolet Corvette (61%)

3. Toyota Tundra (60.9%)

4. Toyota 4Runner (60%)

5. Ford Bronco (57%)

However, depreciation is just one of the costs of owning an automobile. Also, consider the costs of insurance, typical maintenance and repairs, and gas when you’re deciding what is the best car to purchase.

Buying a gently used car is a smart way to beat car depreciation. A brand new car typically depreciates by 20% in the first year. By purchasing a car that’s a year or two old, you can get a car that’s still in almost-new condition at a steep discount. Consider choosing a used vehicle from the manufacturer’s certified pre-owned program.

Tip 3: Maintain your car properly

Having your car serviced regularly will help you avoid expensive repairs and also preserve its resale value. Be sure to follow the maintenance schedule listed in the owner’s manual, get regular oil changes, and keep service records.

Your car will have a higher market value if you can limit the number of miles on the odometer. Consider alternatives to driving your vehicle, like using public transportation, carpooling, walking, and biking.

Getting your car washed and waxed regularly and repairing scratches and dents will help you maintain its value. If possible, park in a garage or covered area to avoid weather damage, scratches from falling tree branches, and damage to the paint from bird droppings.

Aftermarket modifications, like custom paint jobs or engine enhancements, can cause your car to depreciate faster. Because most people prefer unmodified vehicles, there’s a smaller pool of potential buyers, which results in lower resale value.

When you’re in the market for a vehicle, you’ll need to decide whether to buy vs. lease. Here’s how to account for depreciation.

Learn more: Is it better to lease or finance a car? Here’s how to decide.

When you buy a vehicle instead of leasing it, you’ll usually have higher monthly payments, but you’re building equity. If you choose a model that depreciates slowly and you don’t put a lot of wear and tear on the vehicle, you’ll get more money if you sell the vehicle.

Though leasing offers lower payments, the downside is that at the end of the agreement, you’ll need to either buy your vehicle or buy or lease a different car. The bulk of your monthly payment goes toward depreciation, and you’re not building equity.

At the start of the agreement, the leasing company will determine its residual value, which is the car’s estimated value at the end of the lease. That’s the amount you’ll pay (plus applicable taxes and fees) if you buy out the lease when the agreement ends. If you lease a $40,000 vehicle with a 60% residual value, the leasing company expects it to be worth $24,000 at the end of the lease.

Buying a car with a high residual value may seem like it will save you money since most of your payments go toward depreciation. But that’s often not the case because a high residual value means you’ll pay more at the end of the lease.

If you don’t buy the vehicle at the end of your lease, expect to pay for any accelerated depreciation. For example, many leases limit your mileage to 10,000 to 15,000 annually. Leasing companies also typically charge you for excess wear and tear.

Car depreciation doesn’t affect you much until you’re ready to sell or trade in your vehicle. For example, it probably doesn’t matter much if your car loses 15% of its value vs. 20% of its value in the first year if you’re planning to keep it for at least a half-dozen years.

If you want to minimize the effects of car depreciation on your bottom line, avoid trading in your car every year or two. Car values drop dramatically in the early years, even though most vehicles are still in good condition at this point.

Even though another steep drop often happens around the four-year mark, many car owners will benefit from keeping their vehicles past this point. It’s important to weigh the costs of expected maintenance and repairs against the cost of having a new car payment. Often, the cost of the occasional repair for a vehicle that’s a few years old is worth it if you can bank the savings from not having a payment.

Luxury cars often depreciate faster than other vehicles because they’re expensive to repair and maintain, and newer features become outdated quickly. Also, many drivers who prefer a high-end vehicle lease their cars. As a result, there’s often oversupply in the luxury used car market, which pushes down resale prices.

What car brands depreciate the most?

The car with the highest five-year depreciation is the Jaguar I-PACE, according to iSeeCars. Some of the other fastest depreciating cars include brands like Tesla, BMW, Infiniti, and Maserati.

You may be able to write off some car depreciation for tax purposes if you’re a business owner or you’re self-employed and you use your vehicle for business purposes. If you’re deducting a personal vehicle that you use for business, you need to use it for business at least 50% of the time and keep mileage records.

You can only deduct the percentage of depreciation that corresponds to its business use. Because the rules for writing off car depreciation can get complicated, consult with a tax professional.

The IRS standard mileage rate, which is used to calculate reimbursement when you use a personal vehicle for business and other qualifying purposes, is $0.70 per mile in 2025. Of this, $0.33 per mile is considered car depreciation, while the remainder is attributed to other costs associated with the vehicle.

Amy Danise and Tim Manni edited this article.