Depreciation Woes: How Fast Does Your Car Lose Value — and What to Do About It

A new car might feel like a great investment — until you realise it starts losing value the moment you drive it off the showrooms. Depreciation, the steady erosion of a car’s resale worth, is one of the biggest hidden costs of ownership. In India’s price-sensitive auto market, understanding this loss is key to making smarter car-buying and selling decisions.

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What is car depreciation?

Depreciation refers to how much value a car loses over time due to ageing, usage, market trends, and wear and tear. While all cars depreciate, the pace and impact vary across brands, models, and usage patterns. Unlike fuel or insurance, it’s not an upfront cost — but it can quietly drain lakhs from your car’s worth irrespective of its ex-showroom price.

What is the value of depreciation?

In India, most new cars lose around 15–20% of their value within the first year as they shift from ‘new’ to ‘used’ status. By the end of the third year, the depreciation deepens to nearly 35–40%. After five years, a car may lose up to 60% of its original value.

What accelerates depreciation?

Higher mileage typically translates into lower resale value, as prospective buyers associate it with more wear and tear. Neglected servicing, visible dents or damage, and poor upkeep also diminish a car’s appeal. Brands with a reputation for expensive spare parts or subpar service networks lose value quicker.

How to reduce depreciation?

While depreciation is inevitable, the amount can be reduced. Choosing a car with a strong resale history, such as a reliable hatchback or compact SUV, is a good start. Buying a two-three-year-old pre-owned car also helps you skip the steepest phase of depreciation. Regular servicing and maintaining a clean service record go a long way in preserving value. 

Why insurance matters?

Depreciation doesn't just impact resale value — it affects insurance claims too. In the event of repairs, insurers deduct depreciation from the replacement cost of parts. Opting for a zero-depreciation add-on cover can shield you from this loss. While it slightly raises your premium, this add-on ensures better claim payouts, especially for newer vehicles.

Key takeaway

Depreciation is the silent drain on your car’s value, but it doesn’t have to leave you blindsided. By understanding the factors that accelerate it and taking a few smart steps, you can maximise your vehicle’s worth when it’s time to sell or upgrade.