Car Depreciation Calculator — Australia 2026-27
Find out how much value your car loses each year.
Estimate Australian car depreciation with AUD purchase price, kilometres travelled, vehicle age, resale value, and trade-in assumptions.
Australia Car Depreciation Notes
Australian depreciation depends on purchase price, kilometres travelled, vehicle age, warranty remaining, fuel type, condition, and private-sale or trade-in channel.
Use the AUD version to compare annual value loss, expected resale value, and the ownership cost of changing cars sooner or later.
This page keeps kilometres, AUD resale values, and Australian trade-in language separate from UK mileage and US vehicle-value wording.
Australian version note: this car depreciation keeps the calculation anchored to AUD amounts, local product names, Australian tax language, and the way banks, employers, agencies, or advisers usually describe the inputs.
Local cues stay visible where they matter: ATO, PAYG, superannuation, Medicare levy, stamp duty, kilometres, comparison rate, APRA, Centrelink, GST, and Australian-dollar results are not rewritten into overseas vocabulary.
Use the output as an Australian estimate first, then sanity-check it against local quotes, lender criteria, government thresholds, state rules, or professional advice before relying on the number.
Based on ATO diminishing value method (150%, 8yr effective life). Market depreciation varies by brand and model. Depreciation caps apply above the $69,883 car limit.
Select the question that matches where you are right now.
The depreciation figure is the estimated loss in your vehicle's monetary value — not a cash cost you pay directly, but real wealth you lose. It is the single largest component of vehicle ownership cost for most Australians.
Diminishing value front-loads depreciation — you lose more in Year 1 and less in later years. Straight line spreads it evenly. For tax purposes, DV gives you larger deductions earlier (better cash flow). For resale value estimation, real market depreciation often follows a DV-like curve anyway — cars lose more value early.
The value line chart shows how much the car drops in Year 1 — it is always the biggest single-year loss. This is why buying a 2–3 year old car and avoiding that first cliff is often the smartest financial move. The original buyer absorbs the steepest part of the curve.
The ATO depreciation calculation shows your tax book value — the ATO-calculated amount. Actual market resale value varies significantly by brand, condition, and market conditions. A Toyota LandCruiser depreciates far less in the market than a European luxury car, even though the ATO calculation treats both identically. Check Redbook.com.au for real market values.
If you use your car for business, depreciation is tax-deductible — potentially saving thousands in tax. Use Detailed mode to calculate your specific deduction and tax saving.
To claim car depreciation (as opposed to the simpler cents-per-kilometre method), you must keep a logbook for 12 consecutive weeks showing the business-use percentage. This logbook is then valid for 5 years. Without a logbook, you cannot claim depreciation — only a maximum 5,000 km under the cents-per-kilometre method.
The diminishing value method gives you a larger deduction in Year 1 and Year 2 — which is better for cash flow. The ATO allows either method, and you can choose whichever suits your tax situation. You cannot switch methods once chosen for a specific asset. Most business owners choose diminishing value for cars.
Small business entities (SBE) with aggregated annual turnover under $10M may be eligible to immediately deduct the full cost of a car in the year of purchase under the instant asset write-off (IAW). However, the depreciable cost is capped at the car limit ($69,883 for 2026-27). The IAW threshold itself changes frequently — for 2023-24 it was $20,000; check the current year at ato.gov.au. Always consult a registered tax agent before making vehicle purchase decisions based on IAW eligibility.
Depreciation is the biggest financial cost of car ownership. Here is how to minimise it.
The optimal depreciation strategy is to buy a car when it is 2–3 years old (after the steepest curve) and sell it before it reaches the slow-depreciation but high-maintenance phase at 8–10 years. This minimises your annual cost-per-year-of-ownership. A car bought at $28,000 (Year 3 value) and sold at $16,000 (Year 7 value) has lost $12,000 over 4 years — $3,000/yr average.
Toyota (especially HiLux, LandCruiser, RAV4) and Mazda consistently retain the most value in Australia. A Toyota HiLux bought new for $60,000 often has a market resale of $40,000+ after 5 years — 33% depreciation vs the ATO's calculated 53%. European luxury brands (BMW, Mercedes, Audi) frequently depreciate 55–70% in the same period, despite similar ATO calculations.
Electric vehicles are currently depreciating faster than petrol cars in Australia, partly due to uncertainty about battery replacement costs and rapidly evolving technology making older models obsolete quickly. However, lower running costs (electricity vs petrol) partially offset this. This may change as EV ownership matures and battery longevity improves. If buying an EV, the FBT exemption for novated leases is a significant financial advantage for eligible employees.
Depreciation is just one cost. Here is how it fits into the true total cost of car ownership.
The only meaningful way to compare cars is total cost per kilometre. A $60,000 SUV driven 20,000 km/year has a lower cost per km than a $40,000 car driven 8,000 km/year — because depreciation is spread across more kilometres. RACQ, NRMA, and RAA publish vehicle cost comparisons annually that show this on a $/km basis for specific models.
If you borrow to buy the car, add the interest cost. At 7% p.a. on a $35,000 car loan over 5 years, total interest is approximately $6,500. This turns a $18,600 depreciation loss into a $25,100 total capital cost over 5 years — before fuel, insurance, and servicing. The true cost of a new car is almost always higher than buyers realise at purchase.
Switch to Standard mode and enter your annual km and fuel cost. This shows your estimated annual fuel spend alongside depreciation — the two largest cost categories. For most cars, depreciation + fuel represents 50–65% of total ownership cost. The remaining 35–50% is insurance, registration, servicing, tyres, and financing.
The two ATO-approved depreciation methods for Australian vehicle owners
Diminishing Value (DV) — 150% method
The ATO allows business owners to claim car depreciation using the diminishing value method: Annual deduction = Opening value × (Days held ÷ 365) × (150% ÷ effective life). For a car with an 8-year effective life, the rate is 150% ÷ 8 = 18.75% per year. The deduction is applied to the declining book value each year, so it is highest in Year 1 and decreases each year. Most business owners choose this method as it front-loads deductions.
Straight Line (SL) — prime cost method
Annual deduction = Purchase price × (Days held ÷ 365) × (100% ÷ effective life). For an 8-year effective life: 100% ÷ 8 = 12.5% per year. The deduction is the same dollar amount each year until the asset is fully depreciated. Simpler to calculate but provides smaller deductions in the early years compared to diminishing value.
ATO effective life for cars
The ATO sets the effective life for motor vehicles at 8 years (Tax Ruling TR 2023/1). This applies to most passenger cars, SUVs, and utes. Some vehicle types have different effective lives — motorcycles: 4 years, taxis: 4 years, trucks: 10 years. You can self-assess a shorter effective life if you can demonstrate the car will be scrapped sooner, but the ATO's published rate is the standard.
Car cost limit for depreciation
For cars purchased above the ATO car limit ($69,883 for 2026-27), depreciation deductions are capped at the car limit. This means even if you buy a $120,000 car, ATO depreciation deductions are calculated on $69,883 maximum. Get advice from a tax accountant if your vehicle cost exceeds the car limit.
Typical depreciation curve: Year 1 shock, then slower decline by make and type
| Year | Typical value retained | Annual loss (on $40k car) |
|---|---|---|
| Purchase day | 100% | — |
| Year 1 | 75–80% | $8,000–$10,000 |
| Year 2 | 62–68% | $5,000–$7,000 |
| Year 3 | 54–60% | $3,000–$5,000 |
| Year 5 | 40–50% | $2,000–$4,000 |
| Year 8 | 25–35% | $1,500–$2,500 |
| Year 10+ | 15–25% | $500–$1,500 |
Depreciation by vehicle type
| Vehicle type | 5yr depreciation | Notes |
|---|---|---|
| Toyota HiLux / LandCruiser | ~35–40% | Best resale in Australia |
| Mazda CX-5 / Toyota RAV4 | ~40–45% | Strong popular brands hold value |
| Ford Ranger / Mitsubishi Triton | ~40–48% | Utes hold value well |
| Mainstream passenger car | ~50–55% | Average — typical for family sedans |
| European luxury sedan | ~55–65% | Rapid depreciation — high running costs |
| Electric vehicles (2024) | ~45–60% | Currently depreciating faster — battery uncertainty |
Claiming car depreciation as a tax deduction — business use rules and logbook method
Business use requirement
You can only claim car depreciation as a tax deduction for the business-use percentage of the vehicle. If you use the car 60% for business and 40% private, you can claim 60% of the annual depreciation. To substantiate the business percentage, the ATO requires either: a logbook for 12 consecutive weeks (updated every 5 years) or the cents-per-kilometre method (for up to 5,000km per year).
The logbook method
Keep a logbook for 12 consecutive weeks recording: date, destination, purpose (business or private), and odometer readings. Calculate your business use percentage. Apply this percentage to all car expenses including depreciation. The logbook method is required for depreciation claims — the cents per km method does not allow separate depreciation deductions.
Instant asset write-off (IAW)
If you are a small business entity (SBE), you may be eligible to immediately deduct the full cost of a car (up to the LCT threshold cap) in the year of purchase using the instant asset write-off — rather than depreciating over 8 years. Check the current ATO threshold at ato.gov.au — the IAW threshold changes frequently. For 2023-24, the threshold was $20,000 for most SBEs. Get advice from a registered tax agent.
Novated lease depreciation
In a novated lease (salary sacrifice), the employer makes lease payments from pre-tax salary. The car depreciation is built into the lease calculation by the finance company. The employee does not separately claim depreciation — instead, the full lease payment (minus the FBT statutory fraction method) reduces taxable income. The FBT-exempt EV benefit (for eligible EVs) is a significant advantage of novated leases for zero/low-emission vehicles.
Depreciation, fuel, insurance, registration, servicing — what a car really costs
Depreciation dominates total cost
Most car buyers focus on fuel and running costs, but depreciation is typically the single largest cost of car ownership — often more than fuel and servicing combined. RACQ research consistently shows depreciation accounts for 30–40% of total vehicle ownership costs.
| Cost category | Typical annual cost (40k car, 15k km/yr) |
|---|---|
| Depreciation | $5,000–$8,000 |
| Fuel (petrol ~$1.80/L, 9L/100km) | $2,430/yr |
| Insurance (comprehensive) | $1,200–$2,500 |
| Registration (varies by state) | $800–$1,500 |
| Servicing and tyres | $1,000–$2,000 |
| Interest (if financed at 7%) | $2,000–$3,000 |
| Total annual cost | $12,000–$20,000/yr |
Cost per kilometre
Dividing total annual cost by km driven gives the true cost per kilometre. For a $40,000 car driven 15,000 km/year, total ownership cost is typically $0.80–$1.30 per kilometre. RACQ publishes detailed running cost guides for specific vehicle models annually at racq.com.au.
Minimising depreciation loss
- Buy a 3–4 year old vehicle — previous owner absorbs the steepest depreciation
- Choose high-resale brands: Toyota, Mazda, Subaru, popular utes
- Avoid: European luxury, high-mileage vehicles, modified vehicles
- Hold for 7–10 years — annual depreciation cost decreases significantly by Year 5+
- Service regularly and keep records — supports resale value
❓ Frequently asked Frequently asked questions
How fast do cars depreciate in Australia?
New cars typically lose 20–30% of their value in the first year (the "drive-off-the-lot" effect), then 10–15% per year in subsequent years. After 5 years, most cars have lost 45–55% of their original value. Popular brands like Toyota HiLux and Mazda CX-5 retain value better — losing only 35–45% over 5 years. European luxury vehicles and some EVs depreciate faster, losing 55–65% in 5 years.
What is the ATO effective life for motor vehicles?
The ATO sets the effective life for motor vehicles (cars, SUVs, utes) at 8 years (Tax Ruling TR 2023/1). This means the diminishing value rate is 18.75%/yr (150% ÷ 8) and the straight-line rate is 12.5%/yr (100% ÷ 8). Motorcycles have a 4-year effective life. You can self-assess a shorter effective life if you have evidence the vehicle will be disposed of sooner, but the ATO's standard 8 years applies to most vehicles.
Can I claim car depreciation as a tax deduction in Australia?
Yes — if you use your car for business purposes, you can claim the business-use percentage of depreciation as a tax deduction. To claim depreciation, you must use the logbook method (keeping a 12-week logbook) — the cents-per-kilometre method does not allow separate depreciation claims. If you are a small business entity, the instant asset write-off may allow you to deduct the full cost in Year 1 (subject to the LCT cap and current IAW threshold). Always consult a registered tax agent.
Is it better to buy a new or used car to minimise depreciation?
From a depreciation perspective, buying a 3–4 year old car is almost always better than buying new. The original owner absorbs the steepest depreciation curve (25–40% of the purchase price) in the first 3 years. You then buy the car at its "used" market value and the subsequent depreciation rate is much flatter. The exception is if you need a specific new vehicle for business and can claim significant ATO deductions — in that case, the instant asset write-off or accelerated depreciation can change the calculus.
Where these figures come from
Cost-of-living and inflation figures on this page are drawn from the Australian Bureau of Statistics (CPI), the Reserve Bank of Australia (inflation target and monetary policy), and the Fair Work Commission (minimum wage).
- Consumer Price Index (CPI) — ABS — Consumer Price Index.
- Household expenditure & income — ABS — Household Expenditure Survey.
- RBA inflation target — RBA — Inflation.
- National minimum wage — Fair Work Ombudsman — Minimum wages.
- Fuel & energy price data — Australian Institute of Petroleum / AER.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.