Car Depreciation Calculator — the United States 2026
Find out how much value your car loses each year.
Estimate US vehicle depreciation with USD purchase price, mileage, age, resale value, condition, and trade-in assumptions.
United States Vehicle Depreciation Notes
US vehicle depreciation depends on purchase price, mileage, model year, trim, accident history, regional demand, fuel type, and trade-in or private-party value.
Use the USD version to compare annual value loss, expected resale value, and the cost of selling, trading, or keeping the vehicle longer.
This page uses US terms such as mileage, trade-in value, private-party value, and USD resale pricing rather than Australian miles or UK part-exchange wording.
US setup: this vehicle depreciation is tuned for dollar-denominated scenarios, American payroll and tax references, state-by-state cost differences, and the finance terms people see in lender, employer, or IRS-facing documents.
The page keeps US language in place where it is relevant, including IRS, federal withholding, FICA, 401(k), sales tax, miles, APR, down payment, paycheck, state tax, and USD totals.
Treat the answer as a United States estimate; before acting, compare it with provider disclosures, state rules, federal guidance, lender underwriting, payroll settings, or advice from a qualified professional.
Market depreciation varies by brand, model, and condition. For business use, IRS MACRS depreciation and the IRC §280F luxury-auto caps apply — see the tax section.
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 Americans.
Declining balance front-loads the loss — value drops more in Year 1 and less in later years. Straight line spreads it evenly. Real-world resale value follows a declining-balance curve, so that option best matches the market. For a business tax deduction the IRS uses its own MACRS schedule, not these market curves — see the tax section.
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.
This calculator estimates market resale value — what a buyer would actually pay. That is different from the depreciation you deduct on a business return, which follows the IRS MACRS schedule and the IRC §280F caps. A Toyota Tacoma holds its market value far better than a European luxury sedan, even though both follow the same tax rules. Check Kelley Blue Book or Edmunds for real resale 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.
You can deduct business car costs two ways: the standard mileage rate (76¢ per business mile from 1 July 2026 (72.5¢ January–June per Notice 2026-10) or the actual expense method, which includes depreciation. To use actual expenses and claim depreciation you must track your business-use percentage with a mileage log. You choose one method in the car's first year; switching later is restricted.
Under MACRS, cars are 5-year property depreciated on a 200% declining-balance basis — 20% of cost in year 1, then 32%, 19.2%, 11.52%, 11.52% and 5.76% (half-year convention). That front-loads the write-off into the early years, which helps cash flow. Bonus depreciation and Section 179 can accelerate it further, subject to the §280F caps for passenger autos.
Section 179 lets a business expense qualifying equipment up front (2026 limit $2,560,000). For a standard passenger auto the write-off is limited by the IRC §280F caps: for 2026 (Rev. Proc. 2026-15) first-year depreciation is capped at $12,300, or $20,300 if you claim bonus depreciation. Heavy SUVs and trucks rated over 6,000 lbs GVWR escape the §280F caps — Section 179 on such an SUV is capped at $32,000 for 2026, and 100% bonus depreciation (restored by the OBBBA for property placed in service after 19 Jan 2025) can write off the rest. Always consult a CPA before buying a vehicle for the tax break.
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 the Tacoma, Tundra, and 4Runner), Honda, and the Jeep Wrangler consistently retain the most value in the United States. A Toyota Tacoma bought new for $45,000 often resells for $30,000+ after 5 years — about 35% depreciation. European luxury brands (BMW, Mercedes, Audi) and most EVs frequently depreciate 55–70% in the same period.
Electric vehicles have been depreciating faster than gas cars in the United States, partly due to uncertainty about battery replacement costs and rapidly evolving technology making older models obsolete quickly. Full-electric models lost about 57% of value over five years in recent studies. Lower running costs (electricity vs gas) partially offset this. Note that the federal EV purchase tax credits ended on 30 September 2025 under the OBBBA, so a 2026 EV no longer qualifies for a federal purchase credit.
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 20,000 miles/year has a lower cost per mile than a $40,000 car driven 8,000 miles/year — because depreciation is spread across more miles. AAA publishes an annual "Your Driving Costs" study, and Edmunds and Kelley Blue Book publish five-year cost-to-own figures 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 mi 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.
Market resale depreciation and the IRS MACRS business tax schedule
Market depreciation — the declining-balance curve
Real-world resale value falls fastest early and slower later, so this calculator models market depreciation on a declining-balance curve: each year's loss is a fixed percentage of the vehicle's current value. At the default ~18.75%/year setting, a car keeps roughly 80% of its value each year — matching the shape of typical used-car pricing. The straight-line option instead spreads the loss evenly, which is useful for simple budgeting.
MACRS — how the IRS depreciates a business car
For business use, the IRS does not use market value. Cars are "5-year property" under the Modified Accelerated Cost Recovery System (MACRS), depreciated with the 200% declining-balance method and the half-year convention: 20% of cost in year 1, then 32%, 19.2%, 11.52%, 11.52% and 5.76% — spread across six calendar years. You multiply each year's percentage by your business-use share of the cost.
The IRC §280F luxury-auto caps
Passenger automobiles (GVWR 6,000 lbs or less) are subject to annual depreciation caps under IRC §280F. For vehicles placed in service in 2026 (Rev. Proc. 2026-15) the caps are $12,300 in year 1 — or $20,300 if you claim bonus depreciation — then $19,800 (year 2), $11,900 (year 3), and $7,160 each year after. These caps mean an expensive car is written off over many years rather than all at once.
Heavy vehicles escape the cap
SUVs, pickups, and vans rated above 6,000 lbs GVWR are not "passenger automobiles" for §280F, so the annual caps do not apply. A qualifying heavy SUV can be expensed up to $32,000 under Section 179 for 2026, with 100% bonus depreciation (restored by the OBBBA for property placed in service after 19 January 2025) covering the remaining basis. Get advice from a CPA before relying on this.
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 Tacoma / Tundra | ~35–40% | Best resale in the United States |
| Toyota 4Runner / Jeep Wrangler | ~35–45% | Body-on-frame SUVs hold value |
| Honda Civic / CR-V | ~40–48% | Popular, reliable — strong resale |
| Mainstream sedan / crossover | ~50–55% | Average — typical for family cars |
| European luxury sedan | ~55–65% | Rapid depreciation — high running costs |
| Electric vehicles | ~50–60% | Depreciating faster — battery & tech uncertainty |
Claiming vehicle depreciation as a tax deduction — business use rules, standard mileage vs actual expenses
Business use requirement
You can only deduct car depreciation for the business-use percentage of the vehicle. If you use the car 60% for business and 40% personal, you deduct 60% of the depreciation. To substantiate the business percentage you must keep contemporaneous records — a mileage log showing date, destination, business purpose, and odometer readings. Commuting between home and a regular workplace does not count as business miles.
Standard mileage vs actual expenses
Two methods are available. The standard mileage rate (76¢ per business mile from 1 July 2026 (72.5¢ January–June per Notice 2026-10) bundles depreciation, gas, and maintenance into one per-mile figure. The actual expense method deducts the real costs — including MACRS depreciation and the §280F caps. You must pick a method in the vehicle's first business year; if you start with actual expenses you generally cannot switch to standard mileage later.
Section 179 and bonus depreciation
Instead of depreciating over six years, a business can often expense much of a vehicle up front. Section 179 (2026 limit $2,560,000) plus 100% bonus depreciation can produce a near-total first-year write-off — but a standard passenger auto is still limited by the §280F caps ($12,300 in year 1, or $20,300 with bonus, for 2026). A heavy SUV or truck over 6,000 lbs GVWR avoids those caps (Section 179 on such an SUV is capped at $32,000 for 2026). Get advice from a CPA.
Leasing a business car
If you lease rather than buy, you deduct the business-use share of the lease payments instead of depreciation. To keep the tax treatment roughly even with buying, the IRS requires a small "lease inclusion amount" (added back to income) for higher-value leased cars — the figures are published each year in the same revenue procedure as the §280F caps. There is no US equivalent of an employer salary-packaged car scheme, so the deduction sits with whoever is legally the lessee.
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 maintenance combined. AAA's annual "Your Driving Costs" study consistently shows depreciation accounts for the largest share of total ownership cost for a new vehicle.
| Cost category | Typical annual cost ($40k car, 15k miles/year) |
|---|---|
| Depreciation | $5,000–$8,000 |
| Fuel (gas $3.30/gal, 26 mpg) | ~$1,900/year |
| Insurance (full coverage) | $1,500–$3,000 |
| Registration & taxes (varies by state) | $100–$1,000 |
| Maintenance and tires | $1,000–$2,000 |
| Interest (if financed at 7%) | $2,000–$3,000 |
| Total annual cost | $11,000–$18,000/year |
Cost per mile
Dividing total annual cost by miles driven gives the true cost per mile. For a $40,000 car driven 15,000 miles/year, total ownership cost is typically $0.75–$1.20 per mile. AAA, Edmunds, and Kelley Blue Book publish five-year cost-to-own figures for specific models.
Minimising depreciation loss
- Buy a 2–3 year old vehicle — the previous owner absorbs the steepest depreciation
- Choose high-resale models: Toyota Tacoma/4Runner, Honda Civic/CR-V, Jeep Wrangler, full-size trucks
- Avoid: European luxury sedans, most EVs, high-mileage or modified vehicles
- Hold for 7–10 years — annual depreciation cost drops sharply after Year 5
- Keep service records and clean history — supports resale value
Frequently asked Frequently asked questions
How fast do cars depreciate in the United States?
New cars typically lose 20–30% of their value in the first year (the "drive-off-the-lot" effect), then 10–15% per year after that. After 5 years, most cars have lost 45–55% of their original value. Models like the Toyota Tacoma, 4Runner, and Honda Civic retain value better — losing only about 35–45% over 5 years. European luxury vehicles and most EVs depreciate faster, losing 55–65% in 5 years.
How does business car depreciation work under MACRS?
For business use the IRS depreciates cars as 5-year MACRS property (200% declining balance, half-year convention): about 20% of cost in year 1, then 32%, 19.2%, 11.52%, 11.52% and 5.76%, spread across six calendar years. Passenger autos are also capped by IRC §280F — for 2026 (Rev. Proc. 2026-15) first-year depreciation is limited to $12,300, or $20,300 if you claim bonus depreciation. Heavy SUVs and trucks over 6,000 lbs GVWR avoid the §280F caps.
Can I claim vehicle depreciation as a tax deduction in the United States?
Yes — if you use your car for business, you can deduct the business-use percentage of its cost. Under the actual expense method you claim MACRS depreciation (subject to the §280F caps); alternatively the standard mileage rate (76¢/mile from July 2026) bundles depreciation into a per-mile figure. Section 179 and 100% bonus depreciation can accelerate the write-off, though a standard passenger auto is still limited by §280F. Always consult a CPA.
Is it better to buy a new or used car to minimise depreciation?
From a depreciation perspective, buying a 2–3 year old car is almost always better than buying new. The original owner absorbs the steepest part of the curve (25–40% of the purchase price) in the first three years. You then buy at the "used" market value and the subsequent depreciation is much flatter. The exception is a business that needs a new vehicle and can claim Section 179 plus 100% bonus depreciation — for a heavy SUV or truck over 6,000 lbs GVWR that first-year write-off can change the math.
Where these figures come from
Debt and credit figures on this page come from the Consumer Financial Protection Bureau (CFPB) for consumer-protection rules, The Federal Reserve (rate data), and the FTC for fair-lending oversight.
- Consumer credit rules & disclosures — CFPB — Consumer Financial Protection Bureau.
- Credit card rates & interest data — Federal Reserve — Consumer Credit (G.19).
- Debt collection & fair-lending — FTC — Debt Collection.
- Student loan programs — US Department of Education — Federal Student Aid.
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.