Question

How do I calculate the depreciation value of a car?

Answer 1

The decline in cash value (depreciation) on a car can be calculated by the formula:

`V=C - (1 - r)^t`

where `V` is the value of the car after `t` years, `C` is the original cost and `r` is the depreciation rate.

Example if the initial cost of the car is $10,000, the depreciation rate is 25% and the present value of the car is $4,000, we can calculate how old the car is.

`4000=10000*(1-0.25)^t => 0,75^t = 0.4 => t*log0.75=log0.4 => t=log0.4/log0.7~~2.57 years`