Bike depreciation rate: How to calculate, formula, examples

Updated on - 20 Jan 2026

A bike starts losing value from the moment it leaves the showroom, and this gradual decrease is known as depreciation. This affects more than just its resale price. It also influences insurance premiums, claim payouts and long-term ownership costs. Many riders are unaware of how depreciation works or how insurers determine a bike’s current market value. That’s where understanding the bike depreciation rate calculation becomes useful.

Whether you’re renewing insurance, planning to sell your bike or choosing additional coverage. This guide explains how depreciation works and the key factors that influence it. You will also learn simple methods for calculating bike depreciation value, along with real-world examples.

What is the depreciation rate for bikes?

The depreciation rate of bikes refers to the decrease in percentage in your two-wheeler’s value with each passing year. Several factors determine the reduction. The bike’s age tops the list, followed by its mileage, maintenance history, claim history, climatic condition and market demand.

The bike’s condition also matters. Scratches, dents and mechanical issues accelerate depreciation. Meanwhile, regular servicing and careful handling can slow down the process.

Depreciation rate for bikes as per the Companies Act

The Companies Act, 2013, have standardised the depreciation rate for bikes that businesses can easily use for their accounting purposes.

Here’s a summary of the rules:

• As per Schedule II of the Companies Act, the useful life of a motorcycle, scooter or moped is 10 years.
• The straight-line depreciation rate for these vehicles is 9.5% per year.
• In the straight-line method (SLM), you subtract the same amount each year throughout the bike’s useful life.
• For bikes and scooters used in business, the depreciation is charged under the Written Down Value (WDV) method.
• The WDV depreciation rate is calculated at 25.89% annually. This percentage is from the Companies Act Schedule II for accounting purposes, not an insurance rule. Insurance companies use their own depreciation schedules, as per the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI).
• In the WDV method, you calculate the depreciation value on the original cost in the first year. From the second year onwards, it’s calculated on the reduced value after each year.

Key factors that affect bike depreciation

A bike’s depreciation depends on several practical factors that influence how quickly its value drops over time:

• Age of the bike: The value steadily drops each year, with the highest depreciation occurring in the first 2-3 years.
• Make and model: Popular, fuel-efficient or reliable brands maintain more value than low-demand versions.
• Milage covered: Higher kilometres indicate more wear and tear, which reduces resale value.
• Physical condition: Dents, scratches, faded paint or poor maintenance speed up depreciation.
• Service and maintenance history: Regular service and accurate documentation help maintain value.
• Accident or repair history: Significant repairs, alterations or unintentional damage might reduce the bike's value.
• Market demand: Seasonal trends, evolving technology or new model launches impact value.
• Fuel type and efficiency: Economical and eco-friendly bikes tend to depreciate a little slowly.

Significance of insured declared value (IDV)

The IDV is your bike’s current market value or the maximum amount your insurer will pay if someone steals your bike or it’s damaged beyond repair. When you renew your own damage (OD) or comprehensive bike insurance policy, the insurer calculates the premium based on the updated IDV, which is revised each year as the bike depreciates. As the bike gets older, its value reduces, and in turn, the claim amount you receive.

Here’s a general idea of how depreciation affects your bike’s IDV:

Depreciation rate of bikes after 5 years

After five years, bike depreciation is no longer linked to a fixed IRDAI percentage. Instead, it is decided by mutual agreement between you and the insurer, based on your bike’s condition, usage and current market value.

Insurers may inspect your bike or request recent service records to assess its condition. While older bikes often have lower premiums, mechanical condition matters more than age. Popular, premium, sports and limited-edition models typically retain better value. However, after-market modifications are usually excluded from coverage.

How to calculate bike depreciation?

Bike depreciation is calculated using a simple formula: start with the current ex-showroom price (excluding taxes and registration), apply the depreciation rate based on the bike’s age and subtract this depreciation value from the ex-showroom price to determine the Insured Declared Value (IDV). Here’s how to calculate bike depreciation value:

Let’s say your bike was bought for ₹100,000 (ex-showroom) and is now 3 years old. Based on the table, depreciation is 40%. Therefore, the current value is calculated as:

Depreciation amount: ₹1,00,000 x 40% (1,00,000 X 40 /100) = ₹40,000

IDV/ current value: ₹1,00,000 - ₹40,000 = ₹60,000

Depreciation rate formula for bikes

The depreciation rate on the bike is calculated using a simple formula. You can use this formula every year to estimate your bike’s value.

Formula for calculating IDV:

IDV = Ex-showroom price – (Ex-showroom price x Depreciation Rate)

Or

IDV = Current Market Value – Depreciation Value

Here’s another example:

Ex-showroom price: ₹1,20,000

Age: 2 years

Depreciation: 20%

IDV = ₹1,20,000 - (20% of ₹1,20,000) = ₹96,000

Role of depreciation in bike insurance claims

Depreciation has a direct impact on how much you receive during a claim under a bike insurance policy. As your bike ages, its market value decreases due to wear and tear. Insurers take this lower value into account when determining the Insured Declared Value (IDV) and settling claims. The insurer deducts a specific percentage based on the age of the bike and the material of the item when a claim is made for fixing or replacing damaged parts. This results in a lower payout, meaning the owner must pay the remaining amount out of pocket.

Many riders choose a zero depreciation add-on to avoid these deductions. This add-on guarantees that the insurance covers the whole cost of authorised repairs or replacements without depreciation, resulting in a larger claim amount compared to a standard policy, especially for newer bikes.

Conclusion

Understanding bike depreciation helps you make smarter decisions about coverage, resale value and long-term maintenance costs. Depreciation has a direct impact on your claim settlement and Insured Declared Value (IDV), so choosing the correct protection is critical, especially as your bike gets older. A comprehensive bike insurance plan can provide broader financial protection for your rides, allowing you to stay worry-free.

If you want guidance in selecting the right coverage for your bike, simply fill out the form on this page to receive personalised recommendations and secure the protection that fits your needs.

FAQs

1. Does the third-party insurance premium amount change with IDV?

No. IRDAI fixes third-party premiums, and it stays the same regardless of your vehicle’s IDV.

2. Can I voluntarily increase the IDV of my bike?

While you can opt for a higher IDV, it will result in a higher premium. However, the insurance company may not accept your application if the chosen IDV is much higher than the market value.

3. How can I naturally reduce the depreciation on my bike?

You can reduce the depreciation of your vehicle by servicing it regularly, maintaining it well, using genuine parts, avoiding claims and riding safely. Also, adding a zero-depreciation cover will further help.

4. Are non-factory accessories covered under the bike’s IDV?

Insurers usually exclude non-factory accessories from IDV unless they’re declared and insured separately. If they are not declared, the insurer may either apply depreciation based on their age and material or exclude them from the claim altogether.

5. Can zero depreciation cover stop bike depreciation completely?

Zero depreciation cover does not stop bike depreciation. It only prevents depreciation deductions during approved insurance claims. The bike’s IDV will still decrease each year based on age and market value, even if zero depreciation cover is added.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.