Car Insurance Depreciation Calculator Rates in India

Car depreciation is the difference between how much your car was worth when you bought it and its worth when you sell it. The value of your car goes down over time with the wear and tear of everyday use. So, the more you drive your car, the faster your car’s value will depreciate or drop...Read More

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The rate in which a car loses its value is termed "depreciation." It predominantly kicks in as soon as a customer first starts to use their vehicle, and will increase over time. In short, car depreciation is the difference in the total value of the car when it is purchased and sold.

Car Insurance Depreciation Calculator Rates in India

Vehicle depreciation directly impacts the Insured Declared Value (IDV) and also causes depreciation on the cover leading to change in insurance premiums. The Insurance Regulatory and Development Authority of India (IRDAI) has standardized the depreciation rates on cars. Depending on the car depreciation rate applicable for your car, the car insurance premium and the amount that you receive when you file a car insurance claim may vary.

The Car Insurance Depreciation Rate Calculator is an online calculator that calculates the depreciated value of a car. It calculates the depreciation rate from the purchase price, model year, and mileage. It will calculate the depreciation rate from these three factors and provide you with an estimated depreciated value for your car. Car insurance rates are also calculated based on a number of factors including: your age, where you live, where you work, and the type of vehicle you drive.

What is a Depreciation Rate & How Does it Work?

A depreciation rate is the rate at which a car loses its value over time. It is calculated by dividing the car's original price by its current trade-in value. The calculation for depreciation rates can be done using two different methods:

  • Straight-line value
  • Diminishing value

Straight line Value: - Straight-line depreciation assumes that a vehicle will lose its entire value after a certain number of years. This method typically calculates the depreciation by dividing the vehicle’s original cost by its expected useful life, which is usually expressed in miles or years.

Diminishing Value: - Diminishing value depreciation is calculated by dividing the vehicle’s original cost by its current value. This method typically calculates the depreciation by expressing how much an asset loses in its ability to produce revenue over time.

Follow the below steps to know how to use car depreciation calculator:-

  • Enter the ex-showroom price of your car
  • Enter registration year
  • Click on calculate IDV
  • Based on the above inputs, you will be able to view the insured declared value of the car based on its age.

What is the Average Vehicle Depreciation Rate?

The average vehicle depreciation rate is the percentage of the original value of a car that it loses over time. The average vehicle depreciation rate varies depending on the type of car, its age and its mileage. As a general rule, cars depreciate at a higher rate in their first few years than they do when they get older.

The average vehicle depreciation rate is the percentage of the original value of a car that it loses over time. The average vehicle depreciation rate varies depending on the type of car, its age and its mileage.

How is Depreciation Calculated?

If you are wondering how the depreciation on the various parts of your car is calculated, the following table can answer your queries:

Car Components Rate of Depreciation
Rubber, plastic, batteries, paint, and nylon parts 50%
Fibre parts 30%
Wooden parts 5% in the first year and 10% in the second year
Parts of glass Nil

The periodical depreciation of your car can be computed by using the below table:

Age of the Vehicle % Depreciation
0 to 6 months 5%
6 months to 1 year 15%
1 to 2 years 20%
2 to 3 years 30%
3 to 4 years 40%
4 to 5 years 505

What are the factors that Causes a Car to Depreciate?

Several different factors can impact your car's value. Some you can sort of control and others you can’t. This could be anything from where you live, to whether or not it has a sunroof. Here are some of the biggest factors that lead to car depreciation:

  • Mileage: The more miles you drive, the less your car will be worth. But if you can keep your car's mileage down, you'll have a better chance of retaining some of its value.
  • Fuel economy: Have you seen many Hummers on the road lately? That’s because car buyers like cars that get more miles per gallon.
  • How well it’s maintained: The better you maintain your vehicle, the slower it depreciates, especially if records of its maintenance are kept. So ensure you regularly service your vehicle and maintain its appearance.
  • Shifting consumer preferences: Like fashion trends, people’s tastes in cars tend to change. Some years, folks prefer sedans. Other years, they prefer SUVs. More popular car models won’t depreciate as much as others will.
  • Age of the vehicle: In most cases, the older a car is, the less value it has. Physical appearance and mileage of a vehicle can also effect the car’s value.
  • Condition: Damages to the exterior and the inside affect how much your car will be worth in the future.
  • Reputation: A car that’s built to last will hold its value more than a model that has an unofficial reputation for breaking down or is constantly in the news for recalls.

How Car Depreciation Affects Your Car Insurance Costs?

Car depreciation is the decrease in value of a vehicle over time. This value is determined by the condition of the car, mileage, and engine size. The more miles that are driven on a vehicle, the higher the chance that it will be damaged or break down.

Car depreciation affects your car insurance costs because it can lead to higher premiums for drivers who have a high risk profile for accidents or damages to their vehicles. The process of determining how much money you will save on your car insurance premium by buying a new car is called “car depreciation recovery” or “depreciation recapture."  It takes into account two key factors: -

  • The amount of money you paid for your new vehicle
  • The difference in price between your old and new vehicles.

The following example illustrates how car depreciation recovery is calculated.  In the example, a shopper just purchased a new vehicle with a cost of Rs. 24, 42, 525. The old vehicle was worth Rs. 5, 69, 992. After two years of driving the new car, it has depreciated by Rs. 2, 200, 374 and is now worth only Rs.2, 44, 282.

The buyer is able to take the following deductions based on depreciation: Rs. 4, 92,748 for the cost of wear and tear Rs.14, 65,461 for depreciation on value of vehicle Rs.12, 21,262 for depreciation on cost of vehicle

What is Car Depreciation Calculator?

A car depreciation calculator in India computes vehicle depreciation and helps you to determine your used vehicle cost after you factor in the rate of depreciation. Sometimes, to generate more accurate results, several car depreciation calculators suggest that you enter the mileage and details concerning the car’s general condition. Calculating car depreciation rate in India using this tool produces results that give you insights into the following:

  • Amounts you will have to receive, or pay, while selling, or buying, any given vehicle.
  • Amounts to consider while trading your car at any dealership.
  • IDV insurance and costs of car insurance premiums.

If you wish to calculate the motor depreciation of your car by yourself, you may be able to do so using any of the following formulas:

1. Calculating car depreciation by using the Prime Cost Technique

The cost of running the car X (number of days the car is owned ÷ 365) X (100% ÷ effective life in number of years)

By using this method, the depreciation of the car is calculated as a set percentage of its total cost.

Calculating car depreciation by using the Diminishing Value Technique

The purchase value of the car X (number of days the car is owned ÷ 365) X (effective life in number of year’s ÷ 200%)

In this method, the car depreciation per year is calculated using the car’s base value.

How to reduce your Car’s Rate of Depreciation?

Unfortunately, car depreciation is something you can't avoid. Fortunately, there are some steps you can take to slow it down

  • Keep your car’s mileage down: There are definitely things you can do to cut down on the miles you drive. Instead of running multiple errands a day, try to do them in the same weekly trip. You could also carpool with one of your coworkers once or twice a week to save on gas! If your job requires you to drive long distances often, consider renting a car for those trips instead.
  • Follow your car’s maintenance schedule: Car maintenance is important - it’s the little things that make a real difference. And when you maintain your car, it will retain its value. Not only that, but regular maintenance also improves your car's safety and performance while saving you thousands of dollars over the long run. If you're not sure how often to take your car in for maintenance, it can be a good idea to get a regular maintenance plan.
  • Buy reliable, gently used cars: Like we mentioned earlier, new cars lose their value at a much faster rate than used cars do. That’s why the very best way to buy a car is to save up and buy a reliable, slightly used car with cash.

Frequently Asked Questions:

Does a Vehicle's Condition Impact the Premium it Pays?

It is important to know that a vehicle's condition does not impact the premium it pays. The only factor that impacts the premium is the type of coverage and policy chosen. The insurance industry uses a variety of factors to determine the risk of insuring an individual or company. These factors include, but are not limited to:

  • Age
  • Gender
  • Credit Score
  • Driving History
  • Vehicle Condition.

How much does a car’s value depreciate?

When calculating car depreciation, many factors are considered such as its age, condition, mileage, etc. Usually, its value depreciates by 15%-18%. However, you can get an estimate by subtracting the car’s existing price from its purchase price and minus the sales tax or the fee.

How much does a Car Depreciate after an Accident?

There’s the immediate reason for car depreciation, and that's because your car used to look shiny but now is starting to look old. Whether it’s a minor dent, a broken window, the front end is smashed in, or the car is nearly totaled, it doesn’t have the same resale appeal that it used to.

Sure, you can get the damage repaired through your insurance. But even fully repaired, the depreciation value of a car after an accident is still present. Even with all new parts and no sign of damage anywhere, you can’t command the same resale value.

What is a Car Insurance Depreciation Calculator?

Ideally, it is a tool that calculates the amount of depreciation virtually suffered by the car. However, no such tool is available for the policyholder. Instead, a tool called IDV calculator will help in determining the actual value of the car in terms of car insurance. This can be used as a reference for calculating depreciation.

Conclusion:

Minimizing car depreciation can be possible if your car is in a decent condition (or at least you buy the initial car for the higher resale value). Do take into account that there might be other factors which affect the quality of your vehicle. As an add-on to your comprehensive car insurance, buying a zero depreciation cover means that the value of depreciation will be reimbursed to you. A trusted platform like PolicyBachat can help you choose the right insurance cover from some of the biggest insurance providers in India.

Depending on the kind of car you buy, its depreciates at a different rate. This means that some cars lose value faster than others. This is where a car depreciation calculator can come in handy. Just enter in the mileage and check whether the value of your car would be greater or smaller beyond a set period of time."

You should also consider depreciation when you are buying or selling a car. And by using a depreciation calculator, it becomes easy to calculate the probable resale worth of your vehicle. Here, it is important to keep in mind that depreciation slows down with the age of a car.

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