Car Depreciation Calculator — the United Kingdom 2026-27
Find out how much value your car loses each year.
Estimate UK car depreciation with GBP purchase price, mileage, vehicle age, resale value, condition, and part-exchange assumptions.
United Kingdom Car Depreciation Notes
UK depreciation is shaped by purchase price, mileage, vehicle age, service history, clean-air-zone suitability, condition, and part-exchange or private-sale route.
Use the GBP version to compare annual value loss, expected resale value, and whether keeping the car longer reduces your yearly ownership cost.
This page uses UK terms such as mileage, part-exchange, and GBP resale values rather than Australian kilometre wording or US vehicle-pricing wording.
UK-specific treatment for car depreciation: figures are framed in pounds, with British household or business wording and the assumptions commonly seen in PAYE, HMRC, mortgage, pension, and consumer-credit contexts.
Watch for UK markers in the page copy and inputs: HMRC, PAYE, National Insurance, pension contributions, mileage, vehicle tax, APR, part-exchange, council tax, VAT, and GBP-based totals.
The result should be read as a United Kingdom estimate, so compare it with UK provider quotes, HMRC or GOV.UK guidance, lender affordability rules, devolved-nation differences, or regulated advice where needed.
Based on estimated market resale value. UK tax treatment depends on ownership, emissions, company-car rules, and business use.
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 Britons.
The market-depreciation curve front-loads the loss — you lose more in Year 1 and less in later years, which is how real resale values actually behave. The straight-line option spreads the loss evenly, which is handy for simple budgeting. Neither is an HMRC method: UK business tax relief is given separately through capital allowances, not by choosing a depreciation curve.
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 calculator applies a smooth depreciation curve, so every car of the same price falls at the same modelled rate. Actual resale value varies significantly by brand, condition, mileage, and demand — a Toyota Land Cruiser holds its value far better than a European luxury saloon that the model treats identically. Check Parkers or Auto Trader for real-world guide prices. HMRC does not set a depreciation figure for cars; business tax relief comes through capital allowances instead.
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 capital allowances on a car (as opposed to the simpler flat-rate mileage method), you must keep detailed mileage records showing the business-use percentage. Under HMRC's simplified expenses you can instead claim a flat 55p per mile for the first 10,000 business miles (25p per mile after that, 2026/27) — but then you cannot also claim capital allowances or actual running costs on the same vehicle. Keep a mileage log to support whichever method you choose.
In the UK you do not pick a depreciation method for a business car — capital allowances are given as writing-down allowances on a reducing-balance basis, so the deduction is largest early and shrinks each year. The car goes into the main pool at 14% a year if its CO2 emissions are 50g/km or less, or the special-rate pool at 6% a year if they are above 50g/km. A new and unused fully electric car instead gets a 100% first-year allowance. Your real choice is capital allowances versus the flat-rate mileage method — not which curve to use (gov.uk/capital-allowances/business-cars).
Unlike most business equipment, cars do not qualify for the Annual Investment Allowance (AIA) or full expensing, so you cannot write off a car's whole cost in the year you buy it. The only route to a 100% first-year deduction is a new and unused fully electric (zero-emission) car. Every other car is relieved gradually through writing-down allowances — 14% a year for cars up to 50g/km CO2 (main pool) or 6% a year above 50g/km (special-rate pool), both reducing-balance — and there is no separate price cap on the allowance. Check the current rules at gov.uk/capital-allowances/business-cars and speak to an accountant before you buy.
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/year average.
Toyota (especially HiLux, LandCruiser, RAV4) and Mazda consistently retain the most value in the United Kingdom. A Toyota HiLux bought new for £60,000 often has a market resale of £40,000+ after 5 years — 33% depreciation vs this calculator's modelled 53%. European luxury brands (BMW, Mercedes, Audi) frequently depreciate 55–70% in the same period, despite similar modelled figures.
Electric vehicles are currently depreciating faster than petrol cars in the United Kingdom, 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 you get an EV through a workplace salary sacrifice scheme, the low benefit-in-kind rate on electric cars can make the effective cost considerably lower than the list price suggests.
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 mile. A £60,000 SUV driven 12,000 miles/year has a lower cost per mile than a £40,000 car driven 5,000 miles/year — because depreciation is spread across more miles. The RAC, the AA, and What Car? publish running-cost and cost-per-mile comparisons for specific models.
If you borrow to buy the car, add the interest cost. At 7% per year 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 miles 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.
How market depreciation differs from UK tax relief
Market depreciation — value loss over time
This calculator estimates market depreciation: the fall in resale value from purchase date to a future sale or part-exchange. The steepest loss is usually in the first year, then the annual drop slows as the vehicle ages.
Tax relief is a separate calculation
UK tax relief for business vehicles is handled through capital allowances, company-car rules, mileage reimbursement, or lease treatment depending on ownership and use. It is not the same as the resale depreciation shown by the calculator.
Vehicle age, mileage, and condition
UK resale value is usually driven by age, mileage, service history, MOT status, condition, emissions-zone suitability, brand demand, fuel type, and whether the car is sold privately, part-exchanged, or disposed of through a dealer.
Capital allowance and company-car limits
For UK business vehicles, tax relief depends on ownership, private use, emissions, company-car benefit rules, and the relevant capital-allowance pool. Expensive or high-emission vehicles may receive slower relief than low-emission alternatives. Get advice from a UK tax adviser before relying on a deduction.
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 RAV4 / Land Cruiser | ~35–40% | Best resale in the United Kingdom |
| Mazda CX-5 / Toyota RAV4 | ~40–45% | Strong popular brands hold value |
| Ford Ranger / Toyota Hilux | ~40–48% | Pickups and work vehicles can 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 vehicle costs for business use — capital allowances, mileage records, and company-car rules
Business use requirement
You can only claim car depreciation as a tax deduction for the business-use percentage of the vehicle. If a vehicle is used partly for business and partly privately, UK tax treatment depends on ownership, company-car status, capital allowances, and how costs are reimbursed. To substantiate the business percentage, HMRC expects adequate mileage and business-use records, with private use separated from business journeys.
The mileage-records method
Keep mileage records showing date, destination, purpose, and business miles. Calculate your business use percentage. Apply this percentage to all car expenses including depreciation. Detailed mileage records are required for capital-allowance claims — approved mileage payments and capital-allowance claims are different treatments and should not be mixed without advice.
Capital allowances on a business car
Cars are specifically excluded from the Annual Investment Allowance and full expensing, so you cannot deduct a car's whole cost in the year you buy it. Instead you claim writing-down allowances each year: 14% for cars emitting 50g/km CO2 or less (main pool) and 6% for cars over 50g/km (special-rate pool), both on a reducing-balance basis. A new and unused fully electric car is the exception — it qualifies for a 100% first-year allowance. First-year allowances and CO2 thresholds change, so check gov.uk/capital-allowances/business-cars and get advice from a qualified UK tax adviser.
Salary sacrifice car schemes
In a workplace salary sacrifice car scheme, the employer leases the car and the employee gives up an agreed amount of gross salary to cover it. Depreciation is built into the lease rate by the leasing company, so the employee never claims depreciation directly — instead the sacrificed salary reduces income tax and National Insurance, and the employee pays tax only on the car's benefit-in-kind value. Because the benefit-in-kind rate on electric cars is very low, salary sacrifice is especially tax-efficient for zero and 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. UK ownership studies often show depreciation accounts for 30–40% of total vehicle ownership costs.
| Cost category | Typical annual cost (£40k car, 10k miles/year) |
|---|---|
| Depreciation | £4,000–£7,000 |
| Fuel (petrol/diesel, 35 mpg) | £1,600–£2,400/year |
| Insurance (comprehensive) | £700–£1,800 |
| Vehicle tax, MOT, and compliance | £180–£600 |
| Servicing and tyres | £600–£1,500 |
| Interest (if financed at 7%) | £1,500–£3,000 |
| Total annual cost | £8,000–£15,000/year |
Cost per mile
Dividing total annual cost by miles driven gives the true cost per mile. For a £40,000 car driven 10,000 miles per year, total ownership cost can easily land around £0.80–£1.50 per mile depending on depreciation, fuel, insurance, finance, and maintenance.
Minimising depreciation loss
- Buy a 3–4 year old vehicle — previous owner absorbs the steepest depreciation
- Choose high-resale brands: Toyota, Mazda, Subaru, popular SUVs and pickups
- 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 the United Kingdom?
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, Mazda, and selected mainstream SUVs retain value better — losing only 35–45% over 5 years. European luxury vehicles and some EVs depreciate faster, losing 55–65% in 5 years.
How should I estimate vehicle life for planning?
For market-value planning, use the period you expect to own the vehicle and compare that with typical resale values for the model, mileage, service history, and condition. UK tax treatment is separate and may depend on capital allowances, business use, company-car rules, and emissions.
Can I claim car depreciation as a tax deduction in the United Kingdom?
If you use a vehicle for business, UK tax relief depends on ownership, business-use records, emissions, company-car treatment, lease structure, and whether capital allowances or mileage reimbursement is used. Keep mileage records and speak with a qualified UK tax adviser before claiming relief.
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 UK tax relief — in that case, the capital allowances or low-emission vehicle treatment can change the calculus.
Where these figures come from
Debt and credit figures on this page come from the Financial Conduct Authority (consumer credit rules), The Bank of England (rate data), and MoneyHelper — the UK's government-backed money-guidance service operated by the Money and Pensions Service (MaPS).
- Consumer credit rules — FCA — Consumer credit.
- Bank Rate (affects variable-rate debt) — Bank of England — Bank Rate.
- Debt help & free advice — MoneyHelper — Dealing with debt.
- Student loan repayment — GOV.UK — Repaying your student loan.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.