How fast do financed assets really depreciate?
What resale data shows about the first few years of ownership.
Exact resale figures vary too much by make, model, and market to state as a single universal number — but the underlying pattern behind how financed assets lose value is well established, and it’s not the flat, even decline most people assume.
Why depreciation front-loads onto the earliest years
Depreciation is almost always modelled as a percentage of an asset’s currentvalue, not its original price — the same declining-balance shape this site’s own Loan vs Lease Calculator uses. That has a direct consequence: since the asset is worth the most in year one, that same percentage rate translates into the single biggest rupee loss of any year in the asset’s life. Every year after, the same rate applies to a smaller base, so the rupee loss shrinks even though the percentage stays constant — new vehicles, for instance, often lose 15% or more of their value in the first year alone, a steeper drop in absolute terms than any year that follows.
A worked example: five years of decline
Take a ₹10,00,000 asset depreciating at 15% a year — this site’s own default assumption for a financed vehicle or equipment purchase.
| Year | Value | Loss that year |
|---|---|---|
| 0 | ₹10,00,000 | — |
| 1 | ₹8,50,000 | ₹1,50,000 |
| 2 | ₹7,22,500 | ₹1,27,500 |
| 3 | ₹6,14,125 | ₹1,08,375 |
| 4 | ₹5,22,006 | ₹92,119 |
| 5 | ₹4,43,705 | ₹78,301 |
The very first year alone accounts for ₹1,50,000 of value lost — nearly double the ₹78,301 lost in year five, even though both years use the identical 15% rate. By year five, the asset has lost 55.6% of its original value in total, but more than a quarter of that entire five-year loss (₹1,50,000 of ₹5,56,295) happened in year one alone.
Compare the total cost of buying on loan against leasing instead.
Why you can’t just multiply the rate by the years
A common shortcut is to estimate total depreciation by multiplying the annual rate by the number of years — 15% a year for 5 years “should” mean 75% gone, leaving 25% of the value. The real, compounding figure is 55.6% gone, leaving 44.4%— almost double what the naive multiplication suggests, because each year’s loss is a percentage of an already-shrunk balance, not of the original price.
The assumed rate itself matters just as much as the model. Run the same ₹10,00,000 asset over 5 years at the field range this calculator allows: at 10% a year it retains ₹5,90,490 (a 40.9% loss); at 15% it retains ₹4,43,705 (55.6% loss, as above); at 20% it retains just ₹3,27,680 (a 67.2% loss). A swing of just 10 percentage points in the assumed annual rate is the difference between an asset worth ₹5,90,490 and one worth ₹3,27,680 after the same five years — nearly ₹2,63,000 apart from the assumption alone, nothing else changed.
All figures are indicative and for educational purposes only — not financial advice.
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