9 min read
Updated on Aug 08, 2023
Due to natural wear and tear, the worth of a car depreciates or reduces with time. This depreciation can be calculated with a car value calculator. Thus, car value depreciation means the decline in a vehicle’s value in due course of time and it is influenced by different factors.
As soon as you acquire your car from the showroom and drive it on the road, its position reduces from a new car to a used car, and its value goes down noticeably. In fact, this automatically brings down your car’s original market value to 91%, which keeps decreasing with each passing year.
So, to calculate the value of your used car, a Car depreciation rate calculator is used. This tool evaluates the price of your car, and alternatively, it is also used to check the fairness of the price for a used car that you would like to purchase. Thus, with a car depreciation calculator in India, you can calculate the yearly cost of car acquisition.
There is a laid format to ensure the rate of depreciation of cars for calculation of their Insured Declared Value (IDV) as put forward by Insurance Regulatory and Development Authority of India (IRDAI).
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You can use a car depreciation calculator in three easy steps by following these instructions:
Step 1: Enter your car’s ex-showroom pricing.
Step 2: From the dropdown menu, choose the year that your car was registered.
Step 3: Click the “Calculate IDV” button from the menu.
You will be given the suggested IDV depending on the information provided and the age of your car.
As discussed above, IDV is computed based on the selling price stated by the manufacturer of the exact same model of the vehicle in the year the IDV is calculated. For better understanding, let us take the example of Maruti Suzuki and its IDV calculation:
|Vehicle’s Age||Rate of Depreciation for IDV Calculation||Listed Price of Maruti Suzuki Swift VXi||Maruti Swift VXi Calculation of IDV|
|Brand new||5%||Rs. 5,50,000||IDV @95% = Rs. 5,22,500|
|Up to 6 months||5%||Rs. 5,60,000||IDV @95% = Rs. 5,32,000|
|Between 6 months and 12 months||15%||Rs. 5,60,000||IDV @85% = Rs. 4,76,000|
|Between 1 and 2 years||20%||Rs. 5,75,000||IDV @80% = Rs. 4,60,000|
|Between 2 and 3 years||30%||Rs. 6,00,000||IDV @70% = Rs. 4,20,000|
|Between 3 and 4 years||40%||Rs. 5,25,000||IDV @60% = Rs. 3,15,000|
|Between 4 and 5 years||50%||Rs. 5,00,000||IDV @50% = Rs. 2,50,000|
|Over 5 years (obsolete model)||Mutual decision by the owner and the insurance provider||Model not in continuity||IDV calculation mutually decided within a specified range between the owner and the insurance provider|
There are essentially three types of depreciation calculator insurance plans provided to the car owner. These include:
To know how much depreciation on a car per year or how to calculate car depreciation value in India one can go through the below table.
|Age of Car||Rate of Depreciation|
|0-6 Months Old Car||5%|
|6 Months – 1 Year Old Car||15%|
|1 Year – 2 Years Old Car||20%|
|2 Year – 3 Years Old Car||30%|
|3 Year – 4 Years Old Car||40%|
|4 Year – 5 Years Old Car||50%|
|Above 5 Years Old Car||Decided Mutually between the Insurer and the Vehicle Owner|
Here, it is important to understand that there is a difference between depreciation value and depreciation rate, and you shouldn’t confuse one term with another. When it comes to car value depreciation rate, it is your car’s (asset’s) depreciated estimate calculated in percentage across your asset’s expected productive period. On the other hand, depreciation value of a car (asset) is the cost that is substituted for its price minus its remaining value.
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Checkout the below table to know the car components with their rate of depreciation –
|Car Components||Rate of Depreciation|
|All Rubber Parts/Nylon Parts/Plastic Parts/Tyres and Tubes/Batteries and Airbags||50%|
There are varied reasons that lead to the depreciation of a car including maintenance, conduct, model and so on. For a car to have a better depreciation rate, the factors that primarily influence are:
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The internet is flooded with numerous online tools that allow easy calculation of car depreciation to estimate the probable resale cost of a used car.
Further, we are listing out two different formulas to estimate the same. One of them is the Prime Cost Technique and the other is the Diminishing Value Technique.
1. Prime Cost Technique: In case of prime cost technique, the depreciation is calculated based on a set cost percentage.
Depreciation Formula (Prime Cost Method) – Asset’s cost x (days held ÷ 365) x (100% ÷ asset’s effective life)
2. Diminishing Value Technique: In case of diminishing value technique, the estimate is based on the worth of the car.
Depreciation Formula (Diminishing Value Technique) – Base value x (days held ÷ 365) x (200% ÷ asset’s effective life)
By taking certain measures, it is possible to curtail/minimize the depreciation of a car and to enhance resale value to get higher IDV. These include:
Shape of your car (maintenance): If your car is in good shape in terms of maintenance, you have better chances of receiving good resale value of your car. So, try and preserve the maintenance papers of your car intact and try to evade alterations of any kind in your vehicle.
Purchase luxury car with high-resale value: There are many models of cars that offer better resale value as compared to others. You can do some study on resale value of cars before purchasing one to avoid buying a car with high depreciation.
Get a zero depreciation plan: If you get the zero-depreciation add-on plan with your Car insurance, you can claim for the deducted amount for the depreciation.
Also Read: IRDA car insurance claim settlement ratio
We already know now that car depreciation indicates the lowering in value of a car over a period of time due to certain factors such as the age of the vehicle, its current condition/maintenance, size of the engine, overall mileage, and the like.
Now, the depreciation of a vehicle has a direct impact on the cost of its insurance as well. This is because a car that is more prone to damage or accident chances tends to attract a higher premium for its owner.
Depending on the brand and model of a car, its depreciation value differs. Thus, we can say that a car losses its value at different rates as per its brand or model. However, with the help of a car depreciation calculator India, you can find out whether the value of your car would be more or less beyond a specific period of time.
Further, be it for buying a new car or selling an existing one, it is important to take into account the depreciation factors. And by using a depreciation calculator, it becomes easy to calculate the probable resale worth of your vehicle. Here, it is important to keep in mind that depreciation slows down with the age of a car.
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A lot of things affect the depreciation of a car in a year. Normally, the value of a car depreciates around 15%-18% in a given year.
If you want to estimate how much value your car has lost, simply subtract the car's current fair market value from its purchase price, minus any sales tax or fees, you will get the value of your car.
There is no particular rule to confirm a per mile car depreciation cost, and it differs from vehicle to vehicle. Car depreciate cost per mile is actually the average annual depreciation cost divided by the average number of miles you will drive the vehicle per year. So, you can use this way to calculate your car depreciation per mile.
Car Depreciation actually depends on the age of the car and how much it has run on the road. Below is how it is calculated.
Age of Car Rate of Depreciation
1 year – 2 years 20%
2 years – 3 years 30%
3 years – 4 years 40%
4 years – 5 years 50%
For cars that are 5 years and beyond, the rate is decided mutually between the insurer and the vehicle owner.
Maruti Suzuki Swift car is known to be the most depreciation-resistant petrol car in India. This followed by Toyota Innova, Ford EcoSport, Maruti Suzuki Wagon R, and Hyundai Grand i10.
Generally, a car can lose up to 10% of their value in the first month after you starts using it. New cars depreciate quicker than the old used cars. Usually, the value of a new car drops up to 20% after the first year ownership. It then continues to depreciate over 10% every passing year.
The top car with the fastest deprecation is the BMW 7 Series in high-end cars. Other top cars with highest depreciation in India include Hyundai, Volkswagen, Nissan.
Top most reliable car brands in India are: Toyota, Lexus, Honda, Suzuki, Hyundai, Ford and Nissan among others.
Below are some names of cars that are known as dependable and last lasting:
1. Maruti Suzuki Swift
2. Maruti Suzuki Wagon R
3. Honda City
4. Hyundai Creta
5. Jeep Compass
6. Jeep Wrangler
7. Hyundai Verna
8. Maruti Suzuki Dzire
The highest resale value SUVs in India include:
1. Maruti Vitara Brezza
2. Ford Ecosport
3. Mahindra Scorpio
4. Hyundai Creta
5. Toyota Fortuner
There is definitely some amount of value depreciation after a car has been involved in an accident. You can calculate the exact depreciation value by using the car depreciation calculator online. However, as per general norms, there is understandably a depreciation expected between the range of 15 and 18%.
As suggested by its name, a car insurance depreciation calculator is meant to compute the rate at which the value of the car depreciates or lowers over a specified time period by taking into consideration certain specific factors.
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