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Where did you get a 20-30% average depreciation on cars? Depreciation is not linear on vehicles. Most of the depreciation occurs in the first few years and th

Where did you get a 20-30% average depreciation on cars? Depreciation is not linear on vehicles. Most of the depreciation occurs in the first few years and then tapers off. Is this calculated into your algorithm?

mgolawala 12y ago
scroll down. He explains his algorithm : "The caclulator uses exponential depreciation is used to calclate the cost of depreciation and the asset value of a car over time" That sounds like a fair way to do it.
jeffasinger 12y ago
It looks like the 20% is 20% of the value that year, so it looks like value is shown with exponential decay. So if a car starts out at $20,000 it will be worth $16,000 the next year, $12,800 after the second year, and $10,240 after the third. Notice that around the third year, the decrease in value slows considerably.
- pkulak 12y ago
  Yup. And I'd say that's pretty accurate.
khet 12y ago
I'm using an exponential depreciation function to calculate the cost of the car in time. The car loses most of it's value during the first few years.
OrwellianChild 12y ago
While I'm fine with exponential depreciation, the rates are very high (or maybe just variable by car). My RAV4 has closer to 9-10% depreciation (assuming 15k miles/year) per the Edmunds TCO mentioned elsewhere. May be constructive to look up your individual car and input it into khet's calculator. Kudos for giving us the option. May be helpful flag inputs that are highly deterministic of the output and suggest look-ups.
- uncoder0 12y ago
  Yeah I actually have an outlier that has negative depreciation. Got it used for 26k with 44k miles. 6 Months later my insurance company informed me that they had to put my car value closer to 32k due to replacement costs and that this may go up over my ownership of the car.
phamilton 12y ago
That's actually not true, at least not always. I did some analysis on KBB for a car I was looking to buy. I found that for my particular model, depreciation between years 1, 2 and 3 were far less than between 3, 4 and 5. There's a graph on http://www.undiscoveredfeatures.com/2011/09/kelly-blue-book.html http://www.undiscoveredfeatures.com/2011/09/kelly-blue-book.... that shows the relationship.

mgolawala 12y ago

scroll down. He explains his algorithm : "The caclulator uses exponential depreciation is used to calclate the cost of depreciation and the asset value of a car over time" That sounds like a fair way to do it.

jeffasinger 12y ago

It looks like the 20% is 20% of the value that year, so it looks like value is shown with exponential decay. So if a car starts out at $20,000 it will be worth $16,000 the next year, $12,800 after the second year, and $10,240 after the third. Notice that around the third year, the decrease in value slows considerably.

pkulak 12y ago
Yup. And I'd say that's pretty accurate.

khet 12y ago

I'm using an exponential depreciation function to calculate the cost of the car in time. The car loses most of it's value during the first few years.

OrwellianChild 12y ago

While I'm fine with exponential depreciation, the rates are very high (or maybe just variable by car). My RAV4 has closer to 9-10% depreciation (assuming 15k miles/year) per the Edmunds TCO mentioned elsewhere. May be constructive to look up your individual car and input it into khet's calculator. Kudos for giving us the option. May be helpful flag inputs that are highly deterministic of the output and suggest look-ups.

uncoder0 12y ago
Yeah I actually have an outlier that has negative depreciation. Got it used for 26k with 44k miles. 6 Months later my insurance company informed me that they had to put my car value closer to 32k due to replacement costs and that this may go up over my ownership of the car.

phamilton 12y ago

That's actually not true, at least not always. I did some analysis on KBB for a car I was looking to buy. I found that for my particular model, depreciation between years 1, 2 and 3 were far less than between 3, 4 and 5. There's a graph on http://www.undiscoveredfeatures.com/2011/09/kelly-blue-book.html http://www.undiscoveredfeatures.com/2011/09/kelly-blue-book.... that shows the relationship.