Question

The value of a new car depreciates (loses value) in many ways. First, a new car can depreciate in value once it is purchased and driven off the car lot. After that the value of a car depreciates each year because it is one year older. Let's consider two different cars:

Car A Car B
Purchase Price $30,000 and $25,000
Precent of Initial Depreciation
20% 10%

Yearly Depreciation $2,000 $1,500
Based on the data answered in the previous three questions, write an equation to predict the value of Car A and Car B at the end of t years.

Car A: V =
t +

Car B: V =
t +

Answer 1

Your car's value decreases around 20% to 30% by the end of the first year. From years two to six, depreciation ranges from 15% to 18% per year, according to recent data from Black Book, which tracks used-car pricing. As a rule of thumb, in five years, cars lose 60% or more of their initial value.

Explanation: