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How Much is Car Depreciation Per Year?

Discover how much a car depreciates per year, factors affecting depreciation, and its impact on resale value and insurance coverage, with insights into yearly rates.

  • 19 Feb 2024
  • 2 min read

Understanding how much does a car depreciates per year is essential for car owners because it affects important aspects such as resale value and insurance coverage. Over time, it's also crucial to consider when calculating the cost of owning a vehicle.

Car Depreciation Per Year

The moment you start driving your brand-new car on the road, it goes from being new to being used, which leads to a decrease in its market value. Generally, this depreciation process begins right after you buy the car and continues every year. On average, the original market value of a car tends to drop by up to 20% in the initial year alone. This value decreases to about 40% during the following five years.

Several factors influence how much car depreciates per year, including the vehicle’s:

  • Make
  • Model
  • Mileage
  • Age 
  • Overall condition 

While the biggest drop in value occurs in the first year, subsequent years see a slower depreciation rate.

Also read:


Adding zero depreciation add-on to your car insurance can be a solution to counteract the impact of depreciation on insurance claims. This type of coverage ensures that, over time, policyholders receive compensation for any depreciated parts. Zero depreciation add-on also ensures higher claim pay-out and brings peace of mind to the vehicle owner.

Zero depreciation add-on in car insurance comes into play when your car gets damaged due to a natural or man-made disaster, or even accidental damage.

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