Car Depreciation Calculator
A car depreciation calculator helps determine a vehicle's market value, which directly affects the premium of a car insurance policy. By using this calculator, you can estimate the depreciated value of your car after it has been used.
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What is Depreciation, and Why Does it Matter in Car Insurance?
Car depreciation is the reduction in the value of a car and its parts due to wear and tear from the time of purchase to when it is sold. This depreciation directly impacts the Insured Declared Value (IDV) of the car as well as its insurance premium.
Car insurance companies calculate the IDV by subtracting the vehicle depreciation rate from the manufacturer's selling price at the time of purchase. In the event of an accident involving the insured vehicle, the IDV determines the maximum compensation a car owner can receive from the car insurance company.
How Do Insurers Calculate Car Depreciation Rates?
Insurers consider these factors to determine the car depreciation rate and insurance premium:
- Age of the Car: The physical condition and mileage of a car are calculated based on its age. The older the car, the lesser its value.
- Fuel Efficiency: Fuel-efficient cars are cost-effective and have a good resale value.
- Model of the Car: Large luxury cars have a higher depreciation rate than smaller cars because their parts/maintenance are usually more costly.
- Maintenance: The more maintained a car is, the lower its depreciation will be. If your vehicle has bodywork issues or a poor interior, you can expect a high depreciation rate.
- Number of Owners: When it comes to calculating the car depreciation rate, the rule is that the fewer the owners, the better its value.
What is a Car Depreciation Calculator and How to Use it?
A car depreciation calculator is an online tool that helps you know how much value your car has lost over the years based on its age. Here are the three simple steps to use a car depreciation rate calculator online on Policybazaar.com and know your car’s IDV:
- Step 1: Enter your vehicle's registration number.
- Step 2: Select your car's make, model, variant, and registration year.
- Step 3: Click the 'Check IDV' button.
Based on the data provided, you will get the recommended IDV for your car. Alternatively, you can use these formulas to know your car’s IDV:
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Prime Cost Method to Calculate Depreciation on Car
Cost of Running the Car x (Days you owned ÷ 365) x (100% ÷ Effective life in years) = Lost Value
Under this method, the calculation of depreciation is based on the fixed percentage of its cost.
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Diminishing Value Method for Calculating Car Depreciation Rate
Value of the car when purchased x (Days you owned ÷ 365) x (200% ÷ Effective life in years)
Under this method, the calculation is based on the base value of the car. You can simply use a car value calculator to do the above-mentioned task with ease.
Standard Car Depreciation Rates Used by Insurers in India
When deciding the premium price in car insurance, insurers calculate a car’s IDV based on the following depreciation rates set by the Insurance Regulatory and Development Authority of India (IRDAI) as per the age of the car:
| Age of Car | Rate of Depreciation |
|---|---|
| 0-6 months | 5% |
| 6 months - 1 year | 15% |
| 1 year - 2 years | 20% |
| 2 years - 3 years | 30% |
| 3 years - 4 years | 40% |
| 4 years - 5 years | 50% |
| Above 5 years (for obsolete models) | Mutually decided between the insurer and vehicle owner |
Depreciation on Car Parts During Claims
Here are the depreciation rates applied to car components at the time of car insurance claims:
| Car Components | Rate of Depreciation |
|---|---|
| For all rubber parts/nylon parts/plastic parts/tyres and tubes/batteries and airbags | 50% |
| Paintwork | 50% |
| Fibreglass components | 30% |
| Glass components | Nill |
How to Minimise Car Depreciation Rate?
Here are a few simple tips to minimise depreciation on your car and get a higher IDV and resale value:
- Maintenance of Your Car: Keeping your car in good shape increases your chances of receiving a better resale value. Ensure that you maintain a record of the timely servicing. Also, try avoiding modifications in your car, as selling it becomes more difficult.
- Buy a High-Resale Car Model: Some cars hold their value better than others. Do deep research on the resale values of various four-wheelers before you buy one. By this, you can avoid a car with a higher depreciation rate.
- Buy Zero Depreciation Cover: Buy the zero depreciation add-on cover under your car insurance policy, as it repays you for the claim amount that gets deducted due to vehicle depreciation.
FAQs on Car Depreciation Calculator
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Q1. What is the cause of depreciation in a car's value?
Ans: Car depreciation rate can vary based on various aspects such as the make and model of the car, its condition, mileage, number of previous owners, and its overall demand in the market. -
Q2. Why should I use a car depreciation calculator?
Ans: A car depreciation rate calculator allows you to understand the current market value of your car, which is helpful if you're planning to sell or insure your vehicle.
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Q3. How fast does the value of a car depreciate?
Ans: A car's value starts depreciating the moment you buy and take it out of the showroom. -
Q4. What is IDV, and how does the car depreciation rate affect it?
Ans: An Insured Declared Value is the manufacturer's selling price of a vehicle that you receive if it suffers a total loss. An IDV is calculated after deducting the depreciation of a car and its accessories, which implies that the higher the car depreciation rate, the lesser its IDV. -
Q5. How can I calculate depreciation on my car?
Ans: Simply visit Policybazaar.com and open the car depreciation calculator. Input the ex-showroom price of your car and its registration year, and get your car depreciation rate. -
Q6. Can I claim the depreciation amount under my car insurance policy?
Ans: Yes. By purchasing the 'zero depreciation add-on cover' in addition to your car insurance policy for an extra premium amount, you can claim the depreciation amount borne by your car and its parts as per IRDAI guidelines. -
Q7. How much depreciation on cars in 5 years?
Ans: The average car depreciation rate in India is around 15-20% in the first year and up to 50% by the end of 5 years. -
Q8. How do kilometres affect car depreciation?
Ans: A higher number of kilometres means increased wear & tear on a car's engine, suspension, and transmission, resulting in more depreciation. On the other hand, fewer kilometres mean a longer car lifespan, thus less depreciation and a higher resale value. -
Q9. How is market depreciation different from car insurance depreciation?
Ans: Market depreciation is the actual reduction in your car's resale value, based on its demand, condition, and regional factors. On the other hand, insurance depreciation is based on IRDAI's standardised depreciation rates. Insurance companies use Insured Declared Value (IDV) to settle claims, and it is often different from market depreciation. -
Q10. Which cars have the lowest depreciation rates?
Ans: Cars with a long history in the market, significant demand, greater fuel efficiency, and affordable maintenance costs tend to have lower depreciation rates than others.
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#Rs 2094/- per annum is the price for third-party motor insurance for private cars (non-commercial) of not more than 1000cc
*Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB. Actual time for transaction may vary subject to additional data requirements and operational processes.
+Savings are based on the maximum discount on own damage premium as offered by our insurer partners.
^Lowest Price Guaranteed is based on certifications shared by insurers with us. Policybazaar will facilitate price matching subject to the terms and conditions of select insurers.
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