Calculating Car Depreciation: A Beginner’s Guide

Anh Tuan, who lives near Long Bien Market, uses his Thaco Towner 750kg truck to transport fruits and vegetables. Earlier this year, while enjoying tea with fellow drivers on Hang Chieu Street, he overheard a lively discussion about vehicle depreciation.

“My truck’s been running for a few years now; the depreciation must be significant if I sell it,” Anh Tuan thought to himself. But then he wondered, “How do you calculate car depreciation? How can I calculate the costs accurately?”.

If you share the same concerns as Anh Tuan, let’s delve into the details of calculating car depreciation with Hanoi Trucks in this article!

What is Car Depreciation?

Car depreciation is the gradual decrease in a vehicle’s value over time due to usage and wear and tear. This decrease in value is factored into your business expenses. Understanding car depreciation helps you:

• Determine Resale Value: Accurately assess the fair market price when selling or disposing of your vehicle.
• Calculate Costs: Include depreciation costs in your transportation pricing to offer competitive service rates.
• Financial Planning: Budget for future repairs, maintenance, or vehicle replacement.

Thaco Towner 750kg Truck

Calculating Car Depreciation According to Circular 95/2015/TT-BTC

According to Circular 95/2015/TT-BTC issued by the Ministry of Finance, there are two common methods for calculating car depreciation:

1. Straight-Line Depreciation Method

This is the simplest method, commonly used by individuals and transportation businesses.

Formula:

Annual Depreciation = (Initial Value – Salvage Value) / Useful Life

Example:

• Anh Tuan purchased a Thaco Towner 750kg truck for 250 million VND.
• The estimated useful life is 10 years.
• The estimated salvage value is 50 million VND.

Applying the formula:

Annual Depreciation = (250,000,000 – 50,000,000) / 10 = 20,000,000 VND

Therefore, Anh Tuan will deduct 20 million VND in depreciation for his truck each year.

2. Declining Balance Depreciation Method

This method calculates depreciation based on the remaining value of the vehicle after each year. The depreciation amount decreases over time.

Formula:

Annual Depreciation = Beginning Book Value x Depreciation Rate

Example:

• Anh Tuan chooses a depreciation rate of 20% per year for his Thaco Towner 750kg truck.
• Year 1: Depreciation = 250,000,000 x 20% = 50,000,000 VND
• Year 2: Beginning Book Value = 250,000,000 – 50,000,000 = 200,000,000 VND Depreciation = 200,000,000 x 20% = 40,000,000 VND

This calculation continues until the end of the useful life.

Car Depreciation Table for Reference

Note: This table is for reference only. Actual depreciation depends on various factors such as brand, model year, usage condition, etc.

Car Depreciation Table

Frequently Asked Questions About Car Depreciation

1. How is depreciation calculated for used cars?

For used cars, you need to determine the vehicle’s value at the time of purchase and estimate the remaining useful life to calculate depreciation.

2. Is it mandatory to calculate car depreciation according to Circular 95/2015/TT-BTC?

Circular 95/2015/TT-BTC provides general guidelines. Businesses can choose a depreciation method that suits their specific operations.

3. How can I minimize car depreciation?

Regular maintenance, safe driving practices, and using genuine parts can help extend the lifespan and value of your vehicle, thereby minimizing depreciation.

Buy Reliable and Quality Trucks at Hanoi Trucks

Hanoi Trucks is a trusted provider of genuine truck brands at competitive prices. We are committed to providing our customers with quality products, professional services, and attractive offers.

Contact Hanoi Trucks today for detailed advice!

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Popular Truck Models at Hanoi Trucks

• Thaco Towner Trucks
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