Vehicle Depreciation

Vehicle depreciation describes how much a car loses in value as it gets older, accumulates miles, and experiences wear. It is part of the cost of owning a vehicle, even though it is not a bill the driver pays each month.

For example, a vehicle purchased for $40,000 and later sold for $25,000 has lost $15,000 in value.

In a FAVR program, depreciation is a fixed vehicle cost. The employer estimates how much the standard vehicle will lose in value over its retention period and includes the business share of that cost in fixed payments.