Car Depreciation Calculator

A car depreciation calculator helps determine a vehicle's market value, which directly affects the premium of a car insurance policy. By using this calculator, you can estimate the depreciated value of your car after it has been used.

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What is Car Depreciation

Car depreciation is the reduction in the value of a car from the time of buy to when it is sold. In simple words, it is a decrease in the value of a car and its parts over time, depending on several factors.

Every car's value depreciates with time due to natural wear and tear. This decline in value impacts not only its car insurance premium but also the Insured Declared Value (IDV), which is the vehicle's current market value.

As a car ages and depreciates, the IDV also decreases accordingly. Insurers calculate the IDV by subtracting the vehicle depreciation rate from the manufacturer's selling price at the time of buy. In the event of an accident involving the insured vehicle, the IDV determines the maximum compensation a car owner can receive from the car insurance company.

How to Use a Car Depreciation Calculator?

These are the three simple steps to use a car depreciation rate calculator on Policybazaar.com and know its IDV:

Step 1: Enter your vehicle's registration number.

Step 2: Select your car's make, model, variant, and registration year.

Step 3: Click the 'Check IDV' button.

Based on the data provided, you will get the recommended IDV for your car.

Concept and Working of Car Depreciation Calculator

A car depreciation calculator is an online tool that can be used to calculate the car depreciation rate. It helps you determine how much value your car has lost over the years based on its age.

You can use the car value depreciation calculator to know your car's worth and ascertain its IDV, which is the amount you will receive in case of a total loss. Even if you plan to sell your vehicle, the car calculator can help you get a fair resale value.

To calculate your car depreciation rate, you can use two different types of formulas:

1. Prime Cost Method to Calculate Depreciation on Car

   Cost of Running the Car x (Days you owned ÷ 365) x (100% ÷ Effective life in years) = Lost Value

   Under this method, the calculation of depreciation is based on the fixed percentage of its cost.

2. Diminishing Value Method for Calculating Car Depreciation Rate

   Value of the car when purchased x (Days you owned ÷ 365) x (200% ÷ Effective life in years)

   Under this method, the calculation is based on the base value of the car.

   You can simply use a car value calculator to do the above-mentioned task with ease.

Rate of Car Depreciation in India

When an insurance company calculates a car's IDV, it deducts the amount of depreciation sustained by the car over the years. This depreciation is calculated based on car depreciation rates as laid down by the Insurance Regulatory and Development Authority of India (IRDAI) according to the age of the vehicle.

The table below provides an overview of the car depreciation rate in India based on the car's age. You can use this information to calculate your car's IDV.

It is important to know that the depreciation rate for car components varies. Refer to the following table to learn about different car components along with their rate of depreciation.

Factors Affecting Car Depreciation Rates

Several factors affect the value of a car over time. They are as follows:

• Age of the Car: The physical condition and mileage of a car are calculated based on its age. The older the car, the lesser its value.
• Fuel Efficiency: Fuel-efficient cars are cost-effective and have a good resale value.
• Model of the Car: Large luxury cars have a higher depreciation rate than smaller cars because their parts/maintenance are usually more costly.
• Maintenance: The more maintained a car is, the lower its depreciation will be. If your vehicle has bodywork issues or a poor interior, you can expect a high depreciation rate.
• Number of Owners: When it comes to calculating the car depreciation rate, the rule is that the fewer the owners, the better its value.

How to Minimise Car Depreciation Rate?

Here are a few simple tips to minimise depreciation on car and get a higher IDV and resale value:

• Maintenance of Your Car: Keeping your car in good shape increases your chances of receiving a better resale value. Ensure that you maintain a record of the timely servicing. Also, try avoiding modifications in your car as selling it becomes more difficult.
• Buy a High Resale Car Model: Some cars hold their value better than others. Do deep research on the resale values of various four-wheelers before you buy one. By this, you can avoid a car with a higher depreciation rate.
• Buy Zero Depreciation Cover: Buy the zero depreciation add-on cover under your car insurance policy, as it repays you for the claim amount that gets deducted due to vehicle depreciation.