Short answer
Depreciation is purchase price minus later net sale proceeds. Because the sale price is uncertain, model a cautious, central and optimistic scenario.
Important variables
- Model, age and mileage
- Condition and sale channel
- Technology and market risk
- Preparation cost before sale
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Worked example
Buy for €40,000 and sell after five years for €22,000: depreciation is €18,000. If resale is only €18,000, cost rises by €4,000 regardless of finance method.
Break-even: What changes the result?
The resale crossover gives the exact sale price at which an alternative catches up. If it lies far outside plausible values, the result is more robust.
Common mistakes
- Counting the full purchase price as cost
- Equating list and net sale price
- Testing only one resale scenario
- Ignoring pre-sale repairs
Terms in this guide
Residual valueExpected net proceeds from a later sale. It is an uncertain scenario assumption and central to depreciation.DepreciationPurchase price less later net sale proceeds. For ownership it is often a larger cost block than maintenance alone.Net resale proceedsActual sale price after sale-related costs.
Sources & assumptions
- RATIOXA — Methodology and formulas (2026-08-17)
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