Estimate how much your car could lose in value over time using three practical methods: straight-line, reducing balance, and a UK market-style curve. Built for buyers, sellers, PCP drivers, company car users and small businesses that want realistic resale value planning.
Choose the method that matches your decision. Use straight-line for simple budgeting, reducing balance for a front-loaded ownership curve, or UK market mode for a resale-style estimate by vehicle type and mileage.
Market curve uses typical UK retention assumptions. Use real valuation tools before buying, selling, insuring or settling finance.
These practical ranges help you choose sensible assumptions before using the calculator. They are not fixed rules, but they reflect the way UK buyers, dealers and finance companies think about residual value risk.
Many new cars lose roughly 15–35% in year one. The exact drop depends on list-price discounting, registration timing, finance incentives, model updates and whether the car is sought after in the used market.
At three years, a large part of the new-car premium has disappeared. WeBuyAnyCar’s guide milestones commonly use 19% year-one loss, 31% by year two and 42% by year three as a broad planning curve.
Buying a nearly-new car often means the first owner has absorbed the steepest fall. That is why a two- or three-year-old car can be cheaper to own than a discounted brand-new model, even if finance rates differ.
Electric cars can be strong company-car choices, but used EV prices remain sensitive to new model discounts, battery range, charging speed, brand confidence and warranty cover. Some popular EVs sell quickly; others drop sharply.
UK used buyers often compare mileage against roughly 10,000 miles per year. A clean, low-mileage car with a full service history usually attracts more interest than a cheaper high-mileage example with gaps in its records.
Accounting depreciation and market depreciation do not automatically equal tax relief. For business cars, HMRC capital allowance treatment depends on CO₂ emissions, purchase date and whether the car is new and zero-emission.
Car depreciation is the reduction in value between the price you paid for a vehicle and the amount you can realistically sell or trade it for later. It is not as visible as fuel, insurance or servicing because it does not arrive as a monthly bill, but it is often the largest real ownership cost. A driver who buys a £35,000 car and sells it three years later for £20,000 has spent £15,000 in depreciation, even before adding finance interest, tyres, maintenance and road tax.
The reason depreciation is so powerful is that cars are emotional purchases as well as practical assets. New buyers pay for choice, warranty, low mileage, latest technology and that “first owner” status. Used buyers are more cautious. They compare mileage, service history, remaining warranty, condition and similar adverts. Once a car is registered, it moves from the new market into a much larger used market where buyers expect a discount.
For private buyers, understanding depreciation helps you choose the cheapest ownership window. For PCP and HP customers, it helps you understand equity, negative equity and balloon payment risk. For businesses, it helps separate three different numbers: market value, accounting depreciation and HMRC capital allowances. Those figures can look similar, but they are used for different decisions.
A car bought for £28,000 and valued today at £16,800 has lost £11,200. That means the car has depreciated by 40% and retained 60% of its original value. If it took 36 months to reach that point, the average depreciation cost was about £311 per month. This monthly number is useful because it lets you compare cars with different purchase prices in a simple way.
Follow these steps to produce a practical resale-value estimate instead of guessing from headline averages.
Use the true on-the-road price, including factory options and delivery. If you bought used, use the actual purchase price you paid, not the original list price.
Use simple resale loss for today’s value, reducing balance for ownership planning, or market projection when you need an age/type-based value curve.
Low mileage, full service history, desirable colour and clean bodywork improve resale. Poor tyres, warning lights and incomplete service records reduce buyer confidence.
Run the calculator for two or three cars. A cheaper purchase price is not always cheaper overall if the model depreciates faster or attracts weaker demand.
The simple method compares what you paid with what the car is worth today. It is the easiest method and the best one when you already have a current valuation. It works well for private sale planning, trade-in decisions, insurance discussions and checking whether your finance settlement is higher or lower than the car’s value.
Straight-line depreciation spreads the expected loss evenly over your ownership period. For example, if you expect a £30,000 car to be worth £10,000 after five years, the total depreciation is £20,000, or £4,000 per year. It is simple, but it does not reflect the real market because cars usually lose more value in year one than in year five.
Reducing balance applies a percentage to the remaining value each year. The charge is largest at the beginning and gradually becomes smaller. This is a better model for most cars because it mirrors the front-loaded shape of real used-car values. It is especially helpful for comparing new versus nearly-new cars, where the first owner often takes the largest hit.
A market projection uses broad value-retention assumptions by vehicle type and age. Superminis, family hatchbacks, SUVs, premium cars and EVs do not behave the same way. Strong brand reputation, reliable engines, low running costs and high demand improve residual values. Heavy discounting, short model cycles, expensive repairs and weak buyer confidence weaken them.
Brand reputation has a big impact. Models known for reliability, low running costs and broad appeal tend to hold value better. A desirable trim with sensible options may sell quickly, while an unusual colour, weak engine choice or unpopular gearbox can narrow the buyer pool.
Petrol cars remain popular for many private buyers, while hybrids can be attractive because they offer lower running costs without full EV range anxiety. Diesel demand is more selective because of emissions zones and buyer perception, though high-mileage motorway users may still value diesel economy. EV depreciation in 2026 is more complicated: some used EVs are now better value than ever, while the most trusted models with strong range and battery warranty can still attract healthy demand.
Mileage is a quick proxy for wear. A three-year-old car at 18,000 miles looks very different to the same model at 60,000 miles. Full service history matters because it reduces uncertainty. Missing services, cheap tyres, warning lights, uneven paint and poor interior condition all make buyers ask for a discount.
UK used prices are influenced by lease returns, PCP hand-backs, fleet disposals and new-car discounting. If a wave of similar cars returns to the market at the same time, prices can soften. If supply is tight or a model has a loyal following, values can remain stronger than average.
Road tax and company-car tax can affect demand. From April 2025, electric cars no longer avoid VED completely, and new zero-emission cars registered after that date have a first-year rate followed by the standard annual rate. For company cars, Benefit-in-Kind rates remain a major reason many drivers still compare EVs against petrol and diesel alternatives.
If you use a car in a UK business, do not confuse market depreciation with tax relief. Market depreciation tells you what the vehicle is worth. Accounting depreciation is the expense recorded in your accounts. HMRC capital allowances are the tax deduction that replaces accounting depreciation when taxable profit is calculated.
For business cars, HMRC’s capital allowance rate depends mainly on CO₂ emissions and whether the car is new and zero-emission. New and unused zero-emission cars can qualify for 100% First-Year Allowance if bought before April 2027. Cars with 1–50g/km CO₂ generally use the main rate pool, which is 14% from April 2026. Cars above 50g/km use the special rate pool at 6%. Cars do not qualify for the Annual Investment Allowance, even though vans and many other business assets can.
This means a petrol or diesel company car may lose value much faster in the real market than it gives tax relief. For example, a £40,000 car might lose £10,000 in market value in year one but receive only a 6% special-rate tax allowance if it is a higher-emission vehicle. That timing difference is one reason electric company cars can remain attractive even when used EV values are volatile.
Quick guidance for choosing assumptions in the calculator.
| Vehicle type | Typical year 1 loss | Later annual loss | Notes |
|---|---|---|---|
| Small hatchback / supermini | 15–25% | 8–13% | Often holds value well because running costs are low and buyer demand is broad. |
| Family hatchback / saloon | 18–30% | 10–15% | Stable demand, but values depend heavily on trim, engine and mileage. |
| SUV / crossover | 20–32% | 10–16% | Popular body style, but heavy supply can soften values in some segments. |
| Premium / executive | 25–38% | 12–18% | Higher running costs and fleet supply can increase depreciation after year two. |
| Luxury / performance | 30–45% | 14–22% | Strong models can buck the trend, but many expensive cars drop sharply from list price. |
| Electric vehicle | 20–45% | 10–20% | Very model-specific. Range, battery warranty, charging speed and new-car discounts matter. |
Here is a simple example showing why depreciation should be checked before choosing between a new car and a nearly-new car. Imagine a family buyer is comparing a new hatchback at £31,000 with a two-year-old example of the same model at £21,500. The new car has the latest registration plate, full warranty and no previous owner, but it will also take the first-owner depreciation hit. If it loses 25% in year one and 14% in each of the next two years, its estimated value after three years is about £17,200. That is roughly £13,800 of value lost.
The nearly-new car starts lower. If the buyer keeps it for the same three-year period and it loses 12% per year from its already-reduced value, it may be worth about £14,600 at the end. The cash depreciation is around £6,900. Even if the new car has lower repair risk and a better finance rate, the nearly-new example could still be thousands of pounds cheaper to own because the first owner already absorbed the steepest fall.
This does not mean used is always better. A new car can make sense when discounts are strong, warranty matters, the model is in short supply, or an employer’s company car scheme gives a strong EV tax advantage. The point is to compare the total ownership cost, not just the monthly payment. A low monthly PCP can hide a high depreciation curve, while a higher cash purchase can be cheaper if the car holds value well.
Use these internal links to connect this page with your wider depreciation calculator hub.
Answers to the most common questions about UK car value loss, resale value and tax treatment in 2026.