A car depreciates by 20% each year. If the initial value is $25,000, what will be its value after three years?

Tue, 05 May 2026 07:54:11 +0000

**Why a Car Loses 20% of Its Value Annually — and What That Means for Your Investment** Every year, car values decline by a consistent rate—often cited as about 20%. If you bought a reliable vehicle for $25,000, you might wonder: What will it be worth in three years? This question isn’t just hypothetical—it reflects a real financial reality shaping millions of American households. With rising interest in long-term budgeting and sustainable investments, understanding modest depreciation is more relevant than ever. A car’s value typically drops not by a leap, but by a steady percentage each year. Around 20% annually captures common market depreciation trends, especially for mainstream vehicles. While exact depreciation rates vary by model, brand, and market conditions, this percentage offers a widely understood benchmark. For a $25,000 car, after three years of 20% yearly depreciation, the value tends toward a meaningful, predictable milestone—not an absolute stat, but a strong indicator of long-term cost dynamics. How do cars lose value so consistently? The factors include wear and tear, technological obsolescence, market supply changes, and reduced resale demand after the first few years. Unlike some assets, a car’s depreciation is gradual and predictable, making it a focal point in personal finance conversations. Digital tools and financing apps now help users track this decline in real time, building awareness around ownership costs and trade-in planning.