Share:
Glossary Finance

Depreciation

Depreciation is the loss in value of an asset over time through wear, age or obsolescence, or the accounting method of spreading its cost across its useful life.

Last reviewed:

AdSense Placeholder
Slot: header_reference_page

In more detail

With straight-line depreciation, a $30,000 vehicle expected to be worth $6,000 after 5 years loses (30,000 − 6,000) / 5 = $4,800 a year. Other methods, such as declining balance, take more in the early years. Cars typically lose a large share of their value in the first year, which affects loan decisions.

Try these tools

Depreciation Calculator

Calculate asset depreciation using the Straight-Line, Declining Balance, or Sum-of-Years-Digits method.

Car Depreciation Calculator

Project a car's value year by year with a bigger first-year drop.

See also

  • Glossary Amortization
    Amortization is paying off a debt through regular instalments that each cover interest plus part of the principal.
  • Glossary Equity
    Equity is the part of an asset you truly own: its current value minus what you still owe against it.
Back to Glossary
AdSense Placeholder
Slot: footer_leaderboard