How the calculator works it out
Depreciation is the gap between what you pay for a car and what it is worth when you sell or trade it in. The calculator takes the first-year rate off the price, then takes the later rate off whatever value is left each year. It adds your running costs for every year you own the car, plus any loan interest.
Value after year 1 = price × (1 − first-year rate)
Value after each later year = value at the start of the year × (1 − later rate)
Total cost of ownership = (price − final value) + yearly running costs × years + loan interest
Cost per mile = total cost ÷ (miles a year × years)
Where the default rates come from
Kelley Blue Book publishes an average new car depreciation breakdown. It shows how much of the price a car keeps at the end of each year. The defaults here, 16% then 14.5% a year, stay within one percentage point of it:
| End of year | KBB average value left | This calculator’s default |
|---|---|---|
| 1 | 84% | 84.0% |
| 2 | 72% | 71.8% |
| 3 | 61% | 61.4% |
| 4 | 52% | 52.5% |
| 5 | 45% | 44.9% |
KBB’s page does not give a date or a data source for the table, and calls the figures averages. As a cross-check, AAA’s Your Driving Costs 2026 fact sheet puts average depreciation at $4,422 a year over five years on a weighted average price of $39,376, a loss of 56% in five years. The defaults here give about $4,340 a year on that price, a loss of 55%.
Where the running cost defaults come from
All from AAA’s Your Driving Costs 2026 study (September 2026), which averages 34 top-selling new models over five years and 75,000 miles:
- Fuel: 17.3 cents a mile, with regular gas at $4.152 a gallon. At 15,000 miles that is $2,595 a year.
- Maintenance, repair and tires: 11.7 cents a mile, or $1,755 a year at 15,000 miles.
- Insurance: $2,098 a year for full coverage.
- License, registration and taxes: $802 a year. AAA’s figure includes the taxes and fees paid at purchase, averaged over the five years.
- Finance: AAA’s average is $1,184 a year on a 5-year loan with 15% down. Here you enter your own total instead.
Worked example
A $40,000 new car kept for five years, at the default rates. After year 1 it is worth 40,000 × 0.84 = $33,600. After year 2, 33,600 × 0.855 = $28,728. By the end of year 5 it is worth $17,955.76, so it has lost $22,044.24.
With AAA’s average running costs of $7,250 a year (2,595 + 2,098 + 1,755 + 802), five years cost $36,250 more. The total cost of ownership is $58,294.24. That is $11,658.85 a year, $971.57 a month, or about 78 cents a mile over 75,000 miles.
Ways to lose less to depreciation
- Keep the car longer. The yearly loss in dollars shrinks as the value falls.
- Buy a car that is a year or two old, after the biggest drop has happened.
- A bigger down payment does not slow depreciation, but it makes it less likely you will owe more than the car is worth. The car affordability calculator checks your deal against the 20/4/10 rule of thumb.
Questions people ask
How much does a new car lose in value each year?
On average, Kelley Blue Book’s depreciation table shows a new car worth 84% of its price after one year, 72% after two, 61% after three, 52% after four and 45% after five. These are averages across cars, so your model may lose more or less. This calculator defaults to 16% in the first year and 14.5% of the remaining value each year after, which tracks that table to within one percentage point a year.
What does it cost to own a car per year?
AAA’s Your Driving Costs 2026 study puts the average for a new vehicle at $12,863 a year, or $1,071.92 a month, over five years and 75,000 miles. Depreciation is the biggest part, at $4,422 a year. Your number depends on the car, where you live and how far you drive.
What is the cost per mile of owning a car?
AAA’s 2026 averages are $1.10 a mile at 10,000 miles a year, 86 cents at 15,000 and 74 cents at 20,000. Driving more spreads the fixed costs, like depreciation and insurance, over more miles. This calculator divides your total cost by the miles you enter.
Does this calculator work for a used car?
Yes, but change the first-year rate. The big first-year drop applies to new cars. For a car that is a few years old, set both rates to the later-year rate, about 14.5% when worked out from the KBB averages (KBB’s own guide says 8–12% a year once a car is a few years old), or look up your model’s value on a pricing site.
Why is loan interest a separate input?
Interest is part of what the car costs you, but it depends on your loan, not the car. Enter the total interest you will pay while you own the car. The car loan calculator shows it. Leave it at 0 if you pay cash.
What happens after five years?
The KBB table stops at year five. After that, the calculator keeps applying the later-year rate. That is an assumption, not published data, so treat values beyond year five as a rough guide.