The calculation
Car depreciation formula
Depreciation is the reduction from a vehicle's starting value to its later market value. For a forecast, each annual rate is applied to the value remaining at the beginning of that year.
Compounding matters. A 10% decline in two consecutive years does not equal 20% of the original price: the second 10% applies to the already-reduced value.
Two useful modes
Forecast future value or measure actual depreciation
- Forecast future value when planning a purchase, sale or ownership period. Enter a value today and annual assumptions you want to test.
- Measure value lost when you know both the starting and ending market values. The result includes total change and a compound annual rate.
Use the market value on the starting date—not the loan balance. Financing and depreciation are separate: a vehicle can be worth less than the payoff even when the depreciation calculation itself is accurate.
Choosing an assumption
Depreciation varies by the exact vehicle
Kelley Blue Book explains that year, make, model, mileage, condition, reliability, ownership history, service history and market desirability can all affect value. Its 2026 overview says many new cars lose about 30% in the first two years and roughly 55% over five years, but those broad figures are not a prediction for an individual car.
Vehicle-specific factors and current overview: Kelley Blue Book's guide to car depreciation.
Start with a current market estimate for the exact trim, mileage and condition, then test more than one future rate. Used vehicles normally should not receive a “first-year new car” rate, which is why that field applies only when vehicle age is zero.
Worked example
A $40,000 new car held for five years
Suppose the car loses 20% in year one and 10% of its remaining value in each later year. Its estimated value becomes $32,000 after year one, then $28,800 after year two. After five years the compounded estimate is $20,995.
This example loses $19,005, or about 47.5% of the starting value. It is a transparent rate scenario, not an assertion about what a particular model will be worth.
Find a defensible current value
Use market evidence, not the loan statement
Progressive recommends looking up the vehicle's current market value and subtracting it from the value when purchased to measure depreciation. Compare valuation guides and real dealer or purchase offers for the exact vehicle. An outstanding loan balance tells you what you owe, not what the car is worth.
Definition, calculation and value factors: Progressive's car depreciation guide, updated January 8, 2026.
What the estimate leaves out
No formula can predict the used-car market
The calculator has no make-and-model database and does not adjust for mileage, accidents, maintenance, options, regional demand, incentives, inflation or changes in the broader vehicle market. It simply applies the values and rates you enter.
Some collectible or unusually scarce vehicles can appreciate. Measure mode accepts an ending value above the starting value and reports appreciation, but that does not make appreciation a safe forecast for an ordinary vehicle.