Depreciation is the difference between what you pay for a vehicle and what you can sell it for later. It matters when choosing a car, but a confident-looking curve can conceal uncertain assumptions about the purchase price, kilometres and future market.
Use depreciation to test a decision, not to promise a resale result. A practical estimate starts with the exact vehicle you can buy today, the period you plan to keep it and several plausible exit values.
Define the starting price and the exit
For your ownership decision, start with the negotiated purchase price rather than the original list price. Keep transaction costs such as duty, transfer fees and selling fees visible in the wider budget. State whether the future value represents private sale, trade-in or another channel.
The basic calculation is purchase price minus expected resale proceeds. Expressed as a percentage of purchase price, it makes scenarios easier to compare. However, percentage retention alone can obscure the amount of money at risk: a more expensive car may retain a larger share yet lose more dollars.
Hold the ownership period and expected use constant when comparing alternatives. Otherwise the calculation rewards whichever vehicle you assumed would travel less or be sold sooner.
Use age as a research prompt
New vehicles can face an early change in value when they become used, while warranty, model updates and new-car discounts can affect their alternatives. Later, major maintenance, repair history and condition may become more significant. Those are mechanisms to investigate, not fixed rules about every vehicle.
Market observations across major Australian platforms like Savvy show that most models experience their largest relative decline in these early years. During this period, buyers often benefit from purchasing a vehicle that is already out of its steep-drop window but still relatively new.
Treat that marketplace commentary as general context. It is not a controlled AUCN finding, a guarantee for an individual model or evidence that every car follows the same early decline. Check the article's assumptions and compare the specific car's current alternatives before relying on it.
Distinguish a price snapshot from depreciation
If older advertised vehicles are cheaper than newer ones, the difference may include equipment, condition, kilometres, generation and seller mix. The advertisements might also have been collected at different times. Their average price ratio does not establish what the same vehicle lost during ownership.
| Evidence | What it can help answer | What it cannot establish alone |
|---|---|---|
| Current comparable advertisements | Today's available alternatives | Completed sale prices |
| Original list price | Historical positioning | What the first owner paid |
| Different model-year averages | A broad market snapshot | A controlled depreciation rate |
| Actual purchase and sale records | Value change in that transaction | Every owner's future result |
| Written dealer purchase offers | A possible exit today | An offer at a future date |
Prefer a clearly explained range over a precise retention percentage built on mismatched observations.
Build three resale scenarios
Start with a central case based on the closest evidence available. Then consider a weaker exit if new-car discounts intensify, kilometres exceed your plan or a major repair becomes due. Consider a stronger exit only when you can explain the assumption, such as lower usage and sustained demand for the exact specification.
For illustration, a buyer considering a late-model SUV could compare its current price with equivalent older variants, adjust for expected kilometres and examine what a dealer would pay today. Those inputs set a range, not a forecast. If the vehicle is affordable only under the most optimistic resale case, the purchase budget is fragile.
Repeat the exercise for a less expensive alternative. A modest-looking car with lower borrowing and maintenance costs may suit the household better even if its percentage retention is less impressive.
Check what could change your result
Ask a specialist about scheduled major work, parts support and known issues for the exact engine and transmission. For an EV, investigate battery warranty terms, condition evidence, charging compatibility and whether new vehicles are being discounted. For a work vehicle, assess load and towing history rather than assuming a popular badge protects resale.
Compare running-cost assumptions with ASIC's car ownership budgeting guide. The Green Vehicle Guide provides comparable laboratory efficiency information, which should be adapted to actual use.
Preserve value through evidence
Service the vehicle according to its requirements, retain invoices and address developing faults. Record mileage honestly and keep documentation for modifications or major repairs. Before selling, compare the available channels using the market valuation guide, and consider whether preparation costs will realistically be recovered.
Revisit your assumptions when your circumstances change. A different commute, a longer holding period or new finance terms can matter more than small differences between published resale estimates.
Frequently asked questions
Does every car lose the same percentage each year?
No. Purchase discounts, model changes, supply, condition and buyer demand can change the outcome. A generic age curve cannot predict the resale price of an individual car.
Can average asking prices by model year measure depreciation?
Not by themselves. Different model years can contain different variants, kilometres, equipment and observation dates. Measuring depreciation needs a consistent basis and comparable vehicles.
Is the car with the highest resale percentage the cheapest to own?
Not necessarily. Compare the dollar amount lost alongside finance, insurance, maintenance, registration and fuel or electricity over the same holding period.