Depreciation vs investing — half the subtraction
The thing you bought is not losing to nothing. It is losing to the money.
Depreciation is only one side of it. Run your own purchase, then
see why the usual comparison fails.
$5,859.72
$40,000 decaying at 15% a year, in today’s money.
$78,686.05
The same $40,000 at 7% after inflation. The quote omits this.
What is it worth now, and what would the money have been worth?
Most things you buy start losing value the moment you own them. The money you could have invested instead does the opposite. This tool draws both lines on one chart - what the thing is still worth, and what the money would have grown to - and states the gap between them. Both sides are measured in today's money, deflated by the same inflation, because comparing a resale price to an investment balance any other way flatters one of them. It is not an argument against buying things. Set the decay rate below zero and it will show you an object that beats the market, because some do.
The free version draws both curves in full, up to 20 years, and never clamps the answer inside that range: the gap, the half-life, and what a year of owning the thing costs. Pro runs to 50 years, adds the residual floor that keeps a long horizon honest, shows every horizon at once, works out the rate the object would have to appreciate at to have beaten the market, pins several purchases side by side, and adds image and CSV export.
The shareable link is free, for everyone, always. Pro is a separate one-time purchase - if you already subscribe to DCA Simulator Pro, this is not included in it. Worth knowing before you click, rather than at the checkout.
Educational content only - not financial advice. Every headline figure is in today's money: both the thing and the money are deflated by the same inflation rate, because that is the only way the two are comparable. Decay is modelled as a constant annual rate, which real objects do not obey - most lose value fastest at the start - so treat the curve as the shape of the thing rather than a valuation. The market return is an assumption you chose, not a forecast, and no investment returns a fixed rate every year. The tool ignores running costs, insurance, maintenance, tax, and the use you actually got out of the thing, which is usually the entire reason for buying it. Run your own numbers.
The thing you bought is not losing to nothing. It is losing to the money.
Depreciation is normally quoted as a subtraction: it cost this, it is worth that, the difference is what it cost you. That framing leaves out the entire other side of the trade — what the same money would have been doing in the meantime.
$5,859.72
A $40,000 purchase decaying at 15% a year, held for ten, stated in today’s money. The usual quote stops here and calls the loss $34,140.
$78,686.05
The same $40,000 at 7% a year after inflation over the same ten years, also in today’s money. This is the number the subtraction leaves out.
The distance between those two columns is $72,826.33, which is roughly twice what most people believe the purchase cost them. Not because the object depreciated faster than they assumed — it did not — but because the price tag was never the price. The price is the object’s decline plus everything the money did not do.
There is a second failure, quieter and far more common, and it is a units error. Depreciation is measured from actual resale prices, which are future dollars. Investment returns are usually quoted after inflation, which are today’s dollars. Nearly every calculator that sets the two side by side is comparing a nominal number to a real one, and the answer that falls out means nothing. This tool deflates both sides by the same inflation series, so every figure on this page is in today’s money.
Correcting that runs against our own argument, which is exactly why it is worth stating. The mixed version quotes the object in inflated future dollars, so the object comes out looking better than it was. On these defaults the sloppy comparison prints a gap of $70,811.07 against the honest $72,826.33 — it understates the case by $2,015.26. Being wrong in your own favour and being wrong in your own disfavour are the same failure.
Nothing here is hidden. Check every line.
The tool’s opening defaults, worked by hand so you can audit the method before you trust the output. Replace all of them with your own — they are placeholders, not claims about your purchase.
| $40,000 at 15% decay against 7% real | The object | The money | The gap |
|---|---|---|---|
| After 1 year | $33,009.71 | $42,800.00 | $9,790.29 |
| After 3 years | $22,480.46 | $49,001.72 | $26,521.26 |
| After 5 years | $15,309.76 | $56,102.07 | $40,792.31 |
| After 10 years | $5,859.72 | $78,686.05 | $72,826.33 |
Every figure in that table is in today’s money, including the object
That sounds like a footnote and it is the entire method. In the dollars of the year itself, the object is worth $7,874.98 after ten years — 40,000 × 0.8510. Deflated at 3% a year, that same resale value is $5,859.72 in the money you are holding today. Depreciation is measured from actual prices, so it arrives nominal; an investment return quoted after inflation arrives real. Putting them side by side without deflating both is a units error, and it is the standard way this comparison is presented.
Two numbers fall out of the table that are worth more than the totals. The first is the half-life: at 15% a year the object is worth half what you paid after 4.27 years. ln(0.5) / ln(0.85) = 4.2650. The second is what a year of ownership actually costs — the value that disappeared, divided by the years you had it: $3,414.03 a year, before you have paid for fuel, insurance, servicing or storage.
Note what the gap column does. It does not widen steadily; it accelerates, because both sides are moving away from each other at once. The object is shedding a percentage of a falling number while the money compounds on a rising one. That is why the answer at ten years is so much worse than twice the answer at five, and it is the single thing a subtraction of purchase price minus resale value can never show you.
What the depreciation calculator runs, year by year.
Four inputs, no account, no email. Nothing is inferred about you and nothing is looked up. Your figures are sent to this site to be calculated and are never written to a database, kept after the answer comes back, or passed to anyone else.
Name the purchase
An amount, and whether it happens once or repeats — weekly, monthly or annually. A car is a one-off. A leased machine, a wardrobe habit or a rolling upgrade is not, and the shape of the spending changes the answer.
Say how it loses value
Either state a rate, or state what you think it will be worth in a given year and let the tool solve for the rate that implies. The second route exists so nobody has to accept a depreciation figure they did not choose.
Name the market
A return after inflation, and the inflation rate itself. The tool needs both: one to grow the money, the other to deflate both sides so the object and the portfolio are quoted in the same dollars.
Set the horizon
How long you keep the thing. The free version draws both curves in full to twenty years and tells you when it has clamped rather than refusing; Pro runs the same comparison out to fifty.
Three assumptions, and the one you should attack first
The 7% is a real return — after inflation, before tax and fees — and it is the same default used across every tool on this site. It is rounded up from a measured 6.74%: the S&P 500 total return from 1928 to 2025 compounds at 10.02% geometric (Damodaran, NYU Stern), deflated by CPI-U at 3.07% (BLS). It is not “the historical average”, it is one index, one currency, one span, rounded. Change it and the whole page moves.
Change it in which direction matters, so here it is stated plainly: a higher return makes buying look worse, because the person who does not buy is the one holding the cash. That is the assumption working hardest in our favour, and it is therefore the first one you should push on. Set it to 4% and see whether the answer still persuades you. The fee drag defaults to zero, so every figure here is gross of fees; a real portfolio with costs would close some of the gap.
The third assumption is the decay curve itself, and it is pure exponential — a fixed percentage of a falling number, forever. That is a reasonable shape for a car over ten years and a bad one over fifty, because nothing declines to nothing; a scrap value or a floor eventually holds. Pro adds a residual floor for exactly that reason, since a fifty-year horizon without one prints an absurdity. At the default of zero the curve is the naive one, which is honest but only over honest horizons.
Most complaints about this tool are correct.
This is a comparison with a thumb on the scale in one direction and a genuine blind spot in another. Here are the four arguments against the output that actually land.
“It is not an investment. It is transport.”
Correct, and it is the real limit of this tool
Entirely right, and it is the objection worth taking most seriously. The tool prices one side of the trade — the money. It cannot price the hours you did not spend waiting, the job you could take because you could get there, or the plain fact that you wanted the thing.
So read the output as a price, not a verdict. It answers “what did this cost me, properly counted”, and leaves “was it worth it” to you, where it belongs. A number that claimed to settle the second question would be lying about what arithmetic can do.
“15% a year is not what my car does.”
Probably correct — and it is a placeholder, not a finding
15% is the figure usually quoted for a new car. It is not this site’s measurement, and the tool has no resale-value feed — it cannot look your model up and will never pretend to. Depreciation varies enormously by make, age, mileage and how the market happens to be behaving.
Which is why there is a second input mode. Rather than accepting a rate, state what you think the thing will be worth in a given year and the tool solves for the rate that implies. Take that figure from an actual listing for a car like yours, and the whole curve becomes yours instead of ours.
“Nobody actually invests the money they did not spend.”
Correct, and it voids the comparison for most people
The honest answer is that this is true far more often than the framing admits. If the $40,000 would have gone on a different purchase, then the comparison is against that other thing, not against a portfolio, and the gap on this page is a fiction.
The number is only real if the alternative was real. Ask what the money would genuinely have done before you let a figure like $72,826 mean anything — and if the honest answer is that it would have sat in a current account losing to inflation, then say so and run the tool with a return that reflects it.
“My house goes up, so none of this applies.”
Then enter a negative rate — the tool models it
An appreciating object is a supported answer here, not an edge case. The decay rate accepts negative numbers, and entering one tells the tool the thing gains value. This page has no housing series and will not invent one; the rate you enter is yours to justify.
What changes is only how close the two lines run. The comparison does not disappear when the object appreciates — it becomes the interesting version of the question: did the thing beat the market, and by how much. Sometimes it does. The tool will show you that just as readily as the other answer, which is the point of allowing the input at all.
Built for the decision you have not made yet.
One question, answered properly, once. If what you actually need is something else, the honest answer is that this will not give it to you.
It fits if
- You are about to buy something large that loses value — a car, a boat, a camper, equipment, a watch — and want the cost stated fully before you commit rather than afterwards.
- You are choosing between buying new, buying used, or keeping what you have, and want the same arithmetic applied to all three instead of arguing about them.
- You own something you believe appreciates and want to check that belief against the market it is competing with. Enter a negative rate and the tool will happily prove you right.
- You have been quoted a depreciation figure by a dealer or a lease and want to see what it implies over the years you would actually hold the thing.
It does not fit if
- You already bought it and cannot undo it. A sunk cost is not a decision, and a number telling you what it cost will not give you the money back. Close the tab.
- You want to be told whether it was worth it. The tool prices the money and cannot price the use, the time or the wanting. That half is yours.
- The purchase is small or routine. This is built for figures large enough to matter over years — the weekly-spending question belongs to a different tool.
- You need a resale valuation for your specific model. There is no price feed here and there never will be; the rate is an input, not a lookup.
What the thing is really costing you.
Answered against what the tool actually does, not against what would be convenient to claim.
How much does a car depreciate per year?
15% a year is the figure usually quoted for a new car, and this tool opens on it as a placeholder rather than a measurement. There is no resale-value feed here — it cannot look up your model and will not pretend to. Real depreciation varies enormously by make, age, mileage and the state of the used market.
What 15% does give you is a useful shape. At that rate the half-life is 4.27 years — the point where the thing is worth half what you paid. ln(0.5) / ln(0.85) = 4.2650. If you can find an actual listing for a car like yours at a known age, enter that value instead and the tool will solve for the rate it implies.
What is the true cost of buying a car?
Higher than the depreciation, because depreciation only counts one side. On the defaults — $40,000, held ten years, decaying at 15% — the object is worth $5,859.72 at the end, so the usual quote calls the cost about $34,140. But the same $40,000 at 7% a year after inflation would have been $78,686.05, and the distance between those two is $72,826.33.
Both figures are in today’s money. Divided across the years you owned it, that is $3,414.03 a year before fuel, insurance, servicing or storage. The price tag was never the price: the price is the decline plus everything the money did not do.
How is depreciation calculated?
As a fixed percentage of a falling number, compounding downward — value = price × (1 - rate)years. At 15% a year a $40,000 purchase is worth $34,000 after one year, then 15% comes off that, and so on. After ten years it is $7,874.98 in the dollars of that year, which is $5,859.72 in today’s.
That curve is a good description of a car over a decade and a bad one over fifty years, because nothing declines to nothing — scrap value eventually holds. Pro adds a residual floor for long horizons. You can also skip the rate entirely: state what you think the thing will be worth in a given year and the tool solves backwards for the rate that implies.
Can I use this for something that gains value, like a house?
Yes. The decay rate accepts negative numbers, and entering one tells the tool the object appreciates instead of decaying. That is a supported answer here rather than an edge case — refusing to model it would make the tool an argument instead of an instrument.
What it will not do is supply the rate. This page has no housing series and will not invent one; whatever number you enter is yours to justify. The comparison does not go away when the object appreciates, it simply becomes the more interesting question: did the thing beat the market it was competing with, and by how much.
Are the figures adjusted for inflation?
Yes, and on both sides, which is the part most comparisons get wrong. Depreciation is measured from actual resale prices, so it arrives in future dollars. An investment return quoted after inflation arrives in today’s. Setting one against the other without deflating both is a units error, and it is the standard way this comparison is presented.
Correcting it happens to run against the argument, which is why it is worth saying: the mixed version quotes the object in inflated dollars, so the object looks better than it was. On these defaults the sloppy comparison prints a gap of $70,811.07 against the honest $72,826.33. The return input is a real return — after inflation, before tax, and before fees, since the fee drag defaults to zero.
Is my data saved or sent anywhere?
No. There is no account, no email gate and no sign-up. Your figures are sent to this site to be calculated, and the answer comes straight back — nothing you enter is written to a database, kept after the response, or passed to any third party.
The only thing this page stores in your browser is whether you chose dark mode. The free version draws both curves in full out to twenty years and never clamps the answer inside that range; past twenty it tells you it has shortened the horizon rather than quietly truncating it.
Everything above stays free. Pro goes further.
Pro runs to fifty years, adds the residual floor that keeps a long horizon honest, shows every horizon at once, works out the rate the object would have to appreciate at to have beaten the market, pins several purchases side by side, and adds image and CSV export.
Paid once. Not a subscription, not a bundle.
The free version draws both curves in full up to twenty years and never clamps the answer inside that range — the gap, the half-life, and what a year of owning the thing costs. If that already settled it, you do not need this. Educational content only — not financial advice.