Car depreciation – the ultimate guide

How much value does your car lose over time?

Car depreciation means your car loses value over time. Knowing how it works can help you save money when buying, selling, or financing. This simple guide breaks down what depreciation is, why it happens, and how to minimise its impact.

Key Takeaways

Calculation: Subtract the current resale value from the original price to find the total depreciation amount.

Definition: Depreciation is the difference between what you paid for a car and what it is worth when you sell it.

Peak Loss: The sharpest drop occurs in Year 1 (15–35%), with cars typically losing 60% of their value by Year 3.

Value Retainers: Premium models like the Range Rover Evoque and BMW 3 Series currently hold their value better than budget alternatives.

Mitigation: You can slow depreciation by keeping mileage low, maintaining a full service history, and choosing popular colors.

What is car depreciation?
Why do cars lose value over time? And how can I reduce car depreciation?
How much does a car depreciate per year?
How is car depreciation calculated?
When does a car depreciate the most?
FAQs

What is car depreciation?

Car depreciation is the difference between the value of your car when you buy it vs when you sell it. You calculate it by subtracting what your car is worth today from what you originally paid for it.

Why does that matter? Because depreciation is one of the biggest costs of owning a car. It affects how much you lose when you sell, how much equity you build on finance, and whether you are buying at the right time. Understanding how it works puts you in a stronger position, whether you are planning to buy, sell, or simply hold on to your current car for longer.

What causes car depreciation and how can you reduce it?

What speeds up depreciation	How to protect your car’s value
High mileage The UK average is 8,000–12,000 miles per year, so more miles equate to a lower value and a faster depreciation.	Keep mileage low To keep your mileage closer to the average, consider car sharing, combining trips, or using public transport when possible.
Lots of previous owners Having more owners can lead to a higher amount of wear and tear, as well as other issues.	Fewer owners, longer ownership If buying a used car, choose one with fewer owners and keep it for longer yourself.
Gaps in service history Missing records can make buyers wary as they can’t see your car’s full history.	Stay on top of servicing Service your car regularly and make sure you keep all records and receipts. For any repairs, make sure you use manufacturer-approved parts.
Unreliable reputation Models that are known for breakdowns depreciate faster.	Choose a reliable model Choose a brand with strong reliability ratings and keep on top of repairs.
Outdated designs or low desirability Older cars, unpopular models and unpopular colours lose value faster.	Pick popular models and colours Pick a well-reviewed, popular model in a timeless colour e.g. white, black, silver
Poor fuel economy Expensive-to-run cars make them less desirable, which can lower their resale value over time.	Drive efficiently Keep your car well-maintained so it runs efficiently and use good driving habits.
Poorly looked-after car Neglecting to look after the interior and exterior of your car can lead to a reduction in value.	Look after your car’s appearance Make your car look sharp by washing, waxing and looking after its exterior. Check our guide to washing and waxing your car. And try to keep it smoke and pet-free.
The size and cost of your car Luxury cars can be pricey to run, and fewer people are willing to pay for them, which can affect how much you get when selling.	Consider running costs If buying new, think about future resale demand and running costs.
High road tax High road tax can put some buyers off, meaning you might need to drop the price to compete with cheaper-to-run cars.	Choose low-tax options Consider a low-emission model to keep tax bills low.
Low safety scores or MOT fails Cars that can’t enter low-emission zones will be less attractive to buyers, so you may have to compensate on the price.	Stay MOT ready Stay on top of your MOT and sort problems promptly to keep your car appealing. Get tips in our ultimate MOT guide and check your MOT status on Motorway for free.
Failing emission standards Cars that don’t meet emissions rules (e.g. Euro 6 in ULEZ zones) lose value faster.	Meet emissions standards Check emissions before buying and keep your car compliant with local rules.

How much does a car depreciate per year?

The biggest drop in value happens in the first year. After that, the rate slows but continues steadily over time. There is no single formula that applies to every car. The exact rate depends on make, model, mileage, condition, and demand.

Year	% Depreciation Range	% Value Remaining
Year 1	15–35%	65–85%
Year 3	40–60%	40–65%
Year 5	60–70%	30–40%
Year 8–10	~80%	~20%

Data taken from January 2022 – July 2025.

How do you calculate car depreciation?

To calculate car depreciation:

Find the original purchase price of your car.
Find the current resale value.
Subtract the current value from the original price to get the depreciation amount.
To get a percentage, divide the depreciation amount by the original price, then multiply by 100.

Example:

Bought for £20,000, current value £15,000

Depreciation amount: £20,000 – £15,000 = £5,000

Depreciation percentage: (£5,000 ÷ £20,000) × 100 = 25%

When a car starts to become worn, it will lose the value it had as a new, pristine vehicle.

When does a car depreciate the most?

The biggest drop in value happens as soon as you drive a new car off the dealer’s forecourt. At that moment, it changes from “new” to “used.” This switch can cut thousands from its value.

The effect is called instant depreciation. In the first year, cars often lose 15–35% of their value. By year three, they can lose up to 60% or more. After that, depreciation slows down.

If you are buying, this works in your favour. A car that is one to three years old has already absorbed the steepest depreciation, so you get a nearly new vehicle for significantly less. Look for low mileage and a full service history to get the best value. And if you are selling, knowing where your car sits on the depreciation curve helps you pick the right moment. Motorway’s free Car Value Tracker shows you exactly how your car’s value is changing over time, so you can act when the price is right.

How do different car types depreciate?

Cars depreciate at different rates depending on their type. Small city cars typically lose value more slowly compared to higher-mileage crossovers and SUVs, which tend to depreciate faster.

Electric vehicles generally hold their value better than most petrol and diesel cars, which means petrol and diesel models can depreciate faster as demand shifts. If you are thinking about switching, it is worth checking what your current car is worth before the value drops further. You can sell your petrol or diesel vehicle on Motorway, where over 8,000 verified dealers compete to buy, and 84% of Motorway customers sell for more than market value.

When does a car depreciate the most?

The biggest drop in value happens as soon as you drive a new car off the dealer’s forecourt. At that moment, it changes from “new” to “used.” This switch can cut thousands from its value.

The effect is called instant depreciation. In the first year, cars often lose 15–35% of their value. By year three, they can lose up to 60% or more. After that, depreciation slows down.

How do different car types depreciate?

Cars depreciate at different rates depending on their type. Small city cars typically lose value more slowly compared to higher-mileage crossovers and SUVs, which tend to depreciate faster.

Electric vehicles generally hold their value better than most petrol and diesel cars. With this in mind, now could be the perfect time to sell your petrol or diesel vehicle on Motorway. Our network of over 8,000 verified dealers nationwide helps 84% of Motorway customers sell for more than market value

Which cars depreciate the least?

Understanding which cars retain their value can help you make smarter buying and selling decisions.

On Motorway, data from thousands of sales shows that certain models depreciate less over time than others. Here are the top 5 models and how they performed over two years:

Car Model	Avg Price at 1 Year Old (2022)	Avg Price at 3 Years Old (2024)	Value Lost (2 Years)	% Value Lost
Range Rover Evoque	£39,800	£28,800	£11,000	27.6%
BMW 3 Series	£34,000	£24,500	£9,500	27.9%
Mini Cooper	£21,500	£15,500	£6,000	27.9%
Ford Fiesta	£16,750	£11,250	£5,500	32.8%
Vauxhall Corsa	£16,400	£10,800	£5,600	34.1%

Popular budget models like the Ford Fiesta and Vauxhall Corsa depreciate faster, losing over 32% of their value in the same period.

The Range Rover Evoque holds its value best, losing just 27.6% over two years despite a high original price.

The BMW 3 Series and Mini Cooper show similar depreciation percentages around 27.9%, reflecting strong demand and reliability.

FAQs

How important is car depreciation when buying or selling?

Depreciation is often the second biggest cost of car ownership after fuel. When buying, understanding depreciation helps you choose a model that holds its value well, saving you money in the long run. When selling, knowing your car’s depreciation rate helps you set realistic expectations and get the best price.

How does depreciation affect car finance or PCP deals?

If your car is on a finance or PCP plan, depreciation directly affects your monthly payments and your final balloon payment — the large lump sum you can pay at the end of the contract to own the car outright. The faster your car loses value, the higher your costs over the life of the deal and the less equity you have when the contract ends. Choosing a model that holds its value well can make a real difference to what you pay overall.

How much is my car worth right now?

Your car’s current value depends on factors like its age, mileage, condition, service history, and what similar cars are selling for in the market right now. The quickest way to get an accurate figure is to use Motorway’s free car valuation tool, which draws on live market data to give you an up-to-date estimate.

Can insurance protect you against depreciation?

If your car is written off or stolen, your insurer typically pays out the current market value, not what you originally paid. Because of depreciation, that amount can be significantly less than your purchase price, especially in the first few years. Gap insurance covers the difference between the insurer’s payout and either what you paid or the outstanding finance balance. If you bought a new car on finance, it is worth checking whether gap insurance or a new car replacement policy is included, or available as an add-on.

What is the depreciation rate for a car?

There is no single depreciation rate — it varies depending on the make, model, mileage, and condition of your car. That said, most cars follow a similar pattern:

Year one: 15–35% of value lost
By year three: up to 40–60% of value lost
By year five: up to 60–70% of value lost
By years eight to ten: around 80% of value lost

The sharpest drop happens in the first year, the moment a car moves from new to used. After that, the rate slows down. Choosing a model with a strong reliability reputation and keeping on top of servicing can help slow this process.

How many years does a car take to fully depreciate?

Cars don’t reach zero value after a set number of years — depreciation slows over time rather than stopping completely. Here’s how the timeline typically plays out:

Years one to three: the steepest decline, often 40–60% of original value lost
Years four to five: the rate slows, but losses continue
Years eight to ten: most cars have lost around 80% of their original value

After this point, depreciation tends to level out. Some older cars in good condition can hold or even grow in value if they become sought-after. For most everyday cars, though, the first five years are where the biggest financial impact is felt — which is worth keeping in mind when you decide to sell.

Do electric cars depreciate at a different rate to petrol or diesel cars?

In recent years, electric vehicles have generally held their value better than comparable petrol and diesel models. This is partly driven by strong demand and government incentives pushing buyers toward lower-emission cars.

That said, EV depreciation can vary more than you might expect. Key factors include:

Battery condition: a degraded battery that delivers less range will reduce resale value
Model updates: newer EVs with longer ranges can make older models less desirable quickly
Charging infrastructure: how easy it is to charge in your area can affect buyer demand

If you own a petrol or diesel car, now could be a good time to understand what it is worth before the market shifts further. You can get a free valuation on Motorway in minutes

Ready to sell your car?

Motorway connects you to over 8,000 verified dealers nationwide, with 84% of customers selling above market value. Want to read more about owning, valuing and selling your car? Check out more of our guides here, covering everything from insuring your car to maintaining its value. Understand your car’s worth in the wider market.

The information provided on this page is for general informational purposes only and should not be considered as professional advice.