Car Depreciation: Common Mistakes, Tips and FAQs

Introduction

UK drivers juggle imperial gallons, pence per litre and pence per kWh. Converting everything to the same basis is the key to fair comparisons.

This article covers the most common mistakes people make with car Depreciation, what really moves the result, and answers to the questions we hear most often.

Why it matters

Accurate motoring numbers help you budget journeys, claim mileage relief from HMRC and decide whether an electric car makes financial sense for you.

How it's calculated

Cars typically lose 15–20% of their value each year. We apply your rate year on year to the purchase price.

What changes the result most

We raised each input by 10% on its own, starting from a typical example where estimated value is £18,424. Here's what happened:

• Raising purchase price from £30,000 to £33,000 changes estimated value to £20,266 (+10.0%).
• Raising yearly depreciation from 15 % to 16.5 % changes estimated value to £17,465 (-5.2%).
• Raising years owned from 3 to 3.3 changes estimated value to £17,547 (-4.8%).

Focus first on purchase price, which has the biggest effect in this example.

Common mistakes to avoid

1. Using US MPG figures for UK calculations.
2. Ignoring depreciation and insurance in cost-per-mile estimates.
3. Forgetting to claim mileage allowance relief when your employer pays below HMRC rates.
4. Comparing EVs using public charging prices when you'll mostly charge at home.

A quick example

With the inputs below, estimated value comes out at £18,424.

Tips

• UK MPG uses imperial gallons (4.546 litres), which differ from US gallons.
• HMRC's approved mileage rate is 45p per mile for the first 10,000 business miles.
• Home EV charging on an off-peak tariff is usually far cheaper than public rapid chargers.
• Depreciation is often the largest hidden cost of owning a newer car.

Frequently asked questions

What's the quickest way to work out car Depreciation?

Use our free car Depreciation Calculator. It applies this method automatically: Cars typically lose 15–20% of their value each year. We apply your rate year on year to the purchase price.

What MPG should I use?

Use your real-world figure from your car's trip computer if you can; official figures are often optimistic.

Can I claim for commuting miles?

No. Normal commuting to a permanent workplace doesn't count as business mileage.

How often do HMRC mileage rates change?

Rarely. The 45p rate has been unchanged for many years, but always check GOV.UK.

Related calculators

• Fuel Cost Calculator
• MPG Converter
• Car Cost Per Mile Calculator
• Journey Time Calculator
• EV Charging Cost Calculator
• EV vs Petrol Cost Calculator

For the full method, read How to Calculate Car Depreciation in the UK: Step-by-Step Guide.