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How do I Use a Depreciation Calculator?

Vicki Watson
Vicki Watson

A depreciation calculator assists businesses or individuals in determining either the current value of items they own or the rate at which these items have lost or will lose value. For instance, you can find out how much your car has depreciated since you purchased it. A depreciation calculator lets you input appropriate data related to the item you are inquiring about, and it returns either the current value of the item or the assessment of the value reduction. Additionally, you can use a depreciation calculator to find out what the future value of the item might be.

Most items begin losing value as soon as they leave the store. How quickly items depreciate depends on various factors. In the case of automobiles, the rate of depreciation depends on the make and model of the vehicle. The condition of the vehicle also plays into the equation.

Woman holding a book
Woman holding a book

A typical depreciation calculator first asks you to enter the original cost of the item when it was new, followed by the age of the item in years when purchased. If the item was purchased new, you would enter a zero in this field. To ascertain a future value, enter the appropriate number for that year. For example, if you are curious what the value of the item will be when it is five years old, type the numeral "5" in the field for the item age. The depreciation calculator will display an estimate, based on the data inputted, of what the value should be at that time.

These tools are only as accurate as the information provided, of course. For instance, a more simplistic depreciation calculator might not include fields for criteria that influence the future value of the item. For example, an asset free of damage that has been well maintained will depreciate at a lower rate than those that are not cared for as meticulously.

Some depreciation calculators help you determine the rate at which values decrease for each year that the product remains useful. For example, some people consider the useful life of a new computer to be five years. Simply inputting the figures requested on the calculator interface will provide you a table showing the annual depreciation of the computer for the next five years.

Depreciation calculators can be found for free on numerous websites. Additionally, most major spreadsheet software programs include the feature as part of their products. Although depreciation calculators cannot claim to be flawless, they are useful tools to help give you a relatively accurate idea of the current or future value of the item in question.

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