Car Depreciation Calculator

About Car Depreciation

Car depreciation is the difference in the value of a car between the time it was purchased and when it is sold. In simple words, it is a decrease in the value of a car and its parts over time depending on several factors.

Every car’s value depreciates with time due to natural wear and tear. This depreciation or regular wear and tear of your car not only impacts your insurance premium but your car’s Insured Declared Value as well.

How to Use a Car Depreciation Calculator?

Follow these steps to use a car depreciation calculator in three simple steps:

Step 1: Enter the ex-showroom price of your car.

Step 2: Select the car registration year from the dropdown.

Step 3: Press the 'Calculate IDV' button.

Based on the data provided, you will get the recommended IDV based on your car's age.

Concept and Working of Car Depreciation Calculator

Depreciation is the difference between how much you pay to buy a vehicle and the amount you get back after selling it. A car depreciation calculator is an online tool that can be used to calculate the car depreciation rate. A car depreciation calculator can help you in ascertaining the depreciation borne by your four-wheeler as per its age.

You can use the car value depreciation calculator to know the worth of your car as well as ascertain its IDV that you will be paid on a total loss of your car. Even if you plan to sell your car, you can use this calculator to get a fair resale value.

To calculate the depreciation of your car, you can use two different types of formulas:

• Prime Cost Method for Calculating Car Depreciation

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.

• Diminishing Value Method for Calculating Car Depreciation

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 also simply use a car depreciation calculator to do the above-mentioned task with ease.

Rate of Car Depreciation in India

When an insurance company calculates a car’s IDV, they deduct the amount of depreciation sustained by the car over the years. This depreciation is calculated on the basis of depreciation rates as laid down by the Insurance Regulatory and Development Authority of India (IRDAI) as per the age of the car.

The below table gives an overview of the rate of depreciation in India based on the age of the car and can be used to calculate the IDV of your car.

It is important to know that the car depreciation rate for particular car components varies. Check the following table to know the car components with their rate of depreciation-

Factors Affecting Depreciation of a Car

Several factors affect the value of a vehicle over time. They are as follows-

• Age of the Car: The physical condition and mileage of a car are calculated with its age. The older the car means; the lesser the value of the car.
• Fuel Efficiency: Fuel-efficient cars are cost-effective and have good resale value.
• Model of the Car: Large luxury cars have more depreciation rate than smaller cars. It is because their parts/maintenance are usually more costly.
• Maintenance: The more maintained a car is, the lower its depreciation value will be. If your vehicle has bodywork issues or a poor interior, you can expect a high depreciation charge.
• Number of Owners: When it comes to calculating depreciation, the rule is that the fewer the owners, the better the value of the car.

Ways to Minimize Car Depreciation

There are many ways to minimize depreciation and get a higher IDV & resale value for your car. Here are a few tips that you can follow to reduce the depreciation of your car:

1. Maintenance of Your Car: There are chances that you will receive a better resale value if your vehicle is in good shape. Do not forget to maintain a record of the servicing. Also, try to avoid modifications in the vehicle as it makes a car more difficult to sell.
2. 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 a new car. By this, you can avoid a car that has a higher car depreciation.

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 the depreciation of your vehicle.