How to Calculate Car Depreciation in the UK: Step-by-Step Guide

Introduction

Running a car in the UK costs far more than fuel alone. Putting figures on each part of motoring makes it easier to budget, claim what you're owed and compare petrol, diesel and electric.

This guide explains how to calculate car Depreciation in the UK, step by step. Estimate what your car will be worth after a number of years. You'll see the formula, a fully worked example and practical tips for UK readers.

What this calculation covers

Estimate what your car will be worth after a number of years.

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

The method and formula

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

Every figure on our car Depreciation Calculator follows this method, so you can check the working yourself.

Worked example

Here's a typical example using these figures:

Running them through the method gives:

The headline figure is estimated value: £18,424. Change any input and the result will move with it.

How to use the calculator

1. Enter or choose purchase price (£).
2. Enter or choose yearly depreciation (%).
3. Enter or choose years owned.
4. Read your results. The main figure is shown at the top, with a breakdown underneath.
5. Try different values to compare scenarios side by side.

Tips for UK readers

• 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.

Summary

To work out car Depreciation, follow the method above: Cars typically lose 15–20% of their value each year. For a quick, accurate answer with your own figures, use the calculator.

Next, read Car Depreciation: Common Mistakes, Tips and FAQs.