How to compute car depreciation?

pgma

what is the formula?
is the milage part of the computation?

tnx

BeerhandBop

LoL, sa accounting, mayron silang formula na ginagamit ng accountants.

sa real life, value of vehicle depends on market value. add in small factors like low mileage, car condition, etc

DonT

Some companies depreciate cars in 4 to 5 years..with a 10% salvage value..

ymessenger359am

^ i've heard of those company auctions. where can i find one?

glenchuy

ymessenger359am wrote: »

^ i've heard of those company auctions. where can i find one?

unless it's a bank action, it's usually for employees first. so you obviously have to know someone inside. even in banks, they usually offer to employees first.

as for depreciation value. it depends on how they book the expense. it's usually 5 years. so if a car is 1,000,000. it depreciates 200,000 a year. after 5 years, it has a zero book value. wala ng halaga sa companya. so even if they get 10,000.00 ok na yun. pero shempre pa bid, para mas malaki salvage value.

pgma

and how do u compute market value.

let say you want to buy a honda civic 2003 model. how do u know its current market value? how do u compute it?

BeerhandBop

You dont COMPUTE current market value.

market price is SET by the MARKET.

like if brand new yung car was 2 Million, the market value could be 500k lang after 2 years. depends on the demand.

you go look at the classified pages and see how much similar cars sell for is how you figure out market value.

tapos if your car has low mileage, and great condtion, etc.. add in a few ten thousands. ganun lang kadali yun.

a 2003 civic would probably sell for 550 to 620k by my guestimate.

ymessenger359am

^ exactly.

the_BuGs

depende.. tingnan mo yung kung anong meron sa sasakyan mo check mo isa isa ang features kung ok pa sya o hinde...

or try mo to... Kelly Blue Book actually yang site na yan nag-dedetermine na kung nasa tamang price lang yung pagbili mo ng 2nd hand car or kung magkano mo ibebenta yung sasakyan mo...

pgma

i heard kasi na on the first year, less x% from the purchase cost. then on the 2nd year y% naman etc. gusto ko sanang malaman ung exact percentage.

thanks sa reply.

BeerhandBop

as i've said, accountants use some formula to figure out depreciation value ng sasakyan. but that's largely for book keeping reasons.

in real life, there is no such thing as a FORMULA. Market Supply and DEmand is what factors your vehicle's current value.

as i've give you one example,

a 2 million peso car when brand new, could be worth just 500,000 after two years. (usually imported vehicles)

then again, a 1992 Honda Civic hatchback that sold for 300,000 back then, can still be sold for 150,000 nowadays.

the biggest example would be a 1985 to 89 corolla (trueno) sells for 200k nowadays. Simply because of MARKET DEMAND and SUPPLY.

Factors of Economy, my dear.

ale828

+1 above.

Kelleys blue book is just an accounting way to estimate the value of the car. in Real World conditions, car value differs tremendously.

In the Phil, convertibles get astounding resale value, while larger car and non mainstream car manufacturer brand depreciate a lot more.
supply and demand here in our country counts for a lot in the market.Some 10 year old Miata's for example are still being sold at over 400K in some classified ads. there is only a small supply of miata's in the market and demand is high which makes them have a higher resale value, Cars like the Honda EG Hatchback, Honda Civic SiR get astounding resale value, while cars like the Volvo S40, Alfa romero cars, nissan cefiros, get dismal ones.

A 2003 Honda civic is could go for less than 500K to over 500K depending on parts added, mileage, condition, etc.

I suggest you check out the local classifieds ads at buy and sell magazine or sunday classified of manila bulletin to get the relative price of the car your looking for. These classifieds will give you an average of the price for the car your looking for.

OTEP R

A fully restored Toyota Land Cruiser would cost more today than it did when it was brand new...

Land Rover Defenders hardly depreciate in the local market. In the U.S. market, they are sold at more than their brand new purchase price.

So yes, resale value is dictated by the market.

BiTteR_GoDdEsS

accountancy student here

anyways..
depreciation means decrease of usefulness therefore, it decreases the value of an asset

say for example a car (name the brand ) amounting to Php1,000,000 has an expected useful life of 6 years, therefore the car is depreciated at Php166,666.67 (1,000,000/6) annually but a car that has a salvage value is another case.. You just have to subtract the salvage value from the cost of the car then divide by 6

Annual depreciation of a car is considered an expense to its owner.. so kung fully depreciated na ang car, ibenta na

BeerhandBop

"
Annual depreciation of a car is considered an expense to its owner.. so kung fully depreciated na ang car, ibenta na "


Lol.. that's just for rich corporate america.

in reality, take good care of your vehicle. and it will last you more than 10 years.

there really is no point to have your car replaced until after 8 years (or when your car's already 2 model- years old.)

face it, in real world, accountants are only used to keep the tax revenue agency happy. and nothing more.

palace

BeerhandBop wrote: »

face it, in real world, accountants are only used to keep the tax revenue agency happy. and nothing more.

careful there. you might strike a hornet's nest.

i'm a finance guy working for an auto firm so i guess i could share my two cents.

the concept of depreciation is to spread the value of a physical object over the period of its projected use. there are different ways to depreciate an asset but it seldom mimicks the "physical" degradation of the object.

sa company namin, the price of vehicles for sale thru auction is calculated using the market value of such vehicles (as others suggested - using data from published prices of used cars), then adjusted for physical conditions, e.g. mileage, scratches, dents, maintenance record, etc. The depreciated value is only used for internal purpose -- which is to calculate the income from the sale of the vehicle.

OTEP R

I have nothing against accountants and I don't think they deserve to receive any flak from this thread.

For bookeeping purposes, the computations are true.

It's just a lil bit different when it comes to the real world.

Holy cow, a Php1.2M '97 Land Cruiser! hehehe. That's more than what you'd pay for a similarly configured '01 Nissan Patrol.

rendaku

Let’s settle this. My take is that pgma wants to know how the value of the car is reduced based on its “oldness” or age, such that he/she would know its “monetary value” at any given time. First, fixed asset depreciation (in the balance sheets of companies) is different from the depreciation that determines the market value (or Fair Market Value) of a depreciable item such as a car. A zero book value car (of company), depreciate over 5 years, would definitely not have PhP0.00 price if sold., would it? The car would probably be worth 50% of its brand new price in the market. Fixed asset depreciation would be based on Acquisition cost divide by 60 (as in 5 years); reasonable fair market value (fmv) computation for car would be, Current value less 10% per year (this is constant percentage, but not constant Peso value). One reference for car depreciation is the table formulated by AMCI, which is used by insurers to assign value to cars for motor insurance. It includes all vehicle makes and models in the market and covers fmv’s through up to 15-year period (except classics ha). This table is updated yearly. Finally, the fmv is only your reference figure. If you sold your car at a higher price, you’d be happy you made a profit (sans improvements); if you sold it lower, it may mean your car is not attractive and did not fetch good price. It is useful to know your reference price to enable you negotiating power.

rendaku

BeerhandBop wrote: »

You dont COMPUTE current market value... market price is SET by the MARKET.

Yes, market value is analyzed or computed—whether one does pencil pushing or just heard the figure form one who did. Since values are figures, one way or another, they are computed.

Market value can be the rumored or imagined or whimsically set value less the kalawang, less the dented panel, less the torn upholstery, less the faltering harness, less the leaking brake master cylinder, less the dancing shocks, less the cracked mags, less the threadless tires, plus the high-end stereo set-up, less the blistered paint, etc.. etc…

Or it can be (all penciled down) the car’s brand new value, depreciated over N years @ 10% per year, give or take 10% (or so), depending on how desirable or despicable the car is.

BeerhandBop

"Or it can be (all penciled down) the car’s brand new value, depreciated over N years @ 10% per year, give or take 10% (or so), "


Oh how i wish the car depreciates just 10 % a year.

eto na nga eh. Every other poster here that knows about car value has AGREED WITH ME. tapos in comes you, claiming that there is a magic formula to figure out the value?

as i have said. a 2 million car this year (b/ new), could be worth 500k next year.



again, most people agreed with me.

so ano aangal ka pa?

car is like a piece of property. price is commanded by MARKET value.

PhotoJoe

Yes. No amount of pencil pushing can sell a certain car for P1M when people are buying them at P200k less in used car lots. The Blue Book value of any car is almost never the same amount you'd see out there.

Skip the math. Look in the sunday ads, classifieds, ebay, buyandsell, etc. Search for cars of the same make, model, year, mileage and condition that you are selling. Your price should be similar to what others are offering.

Tuner upgrades do not unnecessarily add value to a car. Nonsense items such as bolt-on body kits actually depreciates a car's value. So if you have any of these items in a car that you want to sell, remove them. Keep the car as stock as possible, but do offer the parts as extras.