Financial glossary
Depreciation
In plain English
A decline in an asset’s value over time from age, use, wear, market changes, or obsolescence.
Depreciation
Depreciation is the decline in an asset’s value over time. Vehicles often lose value rapidly in early years because of age, mileage, wear, market demand, and model changes.
For a buyer, depreciation reduces the vehicle value available to offset the remaining loan. Owing more than the vehicle is worth creates negative equity. For a lessee, expected depreciation is embedded in the payment, although the leasing company bears the direct resale-value risk unless the vehicle is purchased.
The lease vs. buy calculator lets you change annual depreciation rather than presenting one forecast as certain. Use conservative scenarios for models with volatile resale values.
Related calculators
- Car Lease vs. Buy CalculatorCompare leasing and buying a car over the same period, including down payments, monthly payments, loan balance, depreciation, maintenance, and equity.
- Car Loan CalculatorEstimate your monthly car payment including trade-in value, down payment, and sales tax. See total interest and the full cost of your auto loan.
- Net Worth CalculatorAdd up what you own, subtract what you owe, and get the single number that tracks your financial progress. Itemized, instant, private.