Motor vehicle depreciation rate means the reduction in a car’s value over time. Simply put, the moment you buy a new car and start using it, it begins to lose its original value. This drop in value occurs due to regular use, ageing, and normal wear and tear.

The more you drive the car and the older it gets, the less it is worth in the market. Even if your vehicle is in good condition, it will not sell for the same price you paid. This process is called vehicle depreciation.

The 4-wheeler depreciation rate helps car owners, buyers, and insurers understand how much a car’s value has reduced since purchase. This rate plays a major role in calculating resale value and insurance premiums.

Understanding depreciation helps you care better for your car and plan when to sell or upgrade it.

• Impacts Second-Hand Car Pricing - Depreciation directly affects the market value of a used car. Buyers use the depreciation rate to negotiate a fair price.
• Helps in Accurate Insurance Valuation - Insurers use the car’s depreciated value to calculate the Insured Declared Value (IDV), which affects your premium.
• Plays a Role in Claim Settlements - During a claim, especially in the case of total loss or theft, the payout is based on the car’s current depreciated value.
• Useful During Resale or Trade-In - Knowing your car’s depreciation rate helps set a realistic resale price or trade-in value at a dealership.
• Guides Upgrade Timing - Understanding when your car's value drops the most can help you decide the right time to sell and upgrade.
• Supports Better Financial Planning - Awareness of depreciation helps manage long-term ownership costs and plan smarter purchases.

Understanding the impact of the car depreciation rate in India helps you track how your vehicle’s value reduces over time. Knowing how it affects your insurance premium helps you make better decisions when buying or renewing car insurance.

Link Between Depreciation and IDV

Car depreciation per year directly affects your car insurance premium through the Insured Declared Value (IDV). IDV is the car’s current market value, which insurers calculate by subtracting depreciation from its original value. Depreciation affects the compensation coverage you can get on your car against a claim.

Lower IDV = Lower Premium + Lower Claim Amount

As your car ages, its value drops. A lower IDV means you pay a reduced premium. However, this also reduces your claim amount in the event of theft or total loss. And this is why understanding the car value depreciation per year is crucial.

Role of IRDAI Depreciation Slabs

The Insurance Regulatory and Development Authority of India (IRDAI) has defined standard depreciation slabs based on a car’s age. Insurers across India use these slabs to calculate 4-wheeler depreciation rates, which directly affect the Insured Declared Value (IDV) and your car insurance premium.

Also Read: Car Insurance Premium Calculator

Understanding how to calculate the car depreciation rate in India helps car owners estimate the current value of their vehicle. It is useful during resale, insurance renewal, or loan applications.

Rate of Depreciation of Car Parts and Accessories

Please note: The depreciation rate for individual components and spares is assessed separately.

Rate of Depreciation for All Other Car Parts Including Wooden Parts

The Schedule of Depreciation for Fixing IDV of A Vehicle

The Schedule of Depreciation for Fixing IDV of a vehicle is issued under the motor insurance rules to determine the car’s current value based on age. Insurers apply these depreciation percentages while calculating the Insured Declared Value (IDV) during policy renewal or claim assessment.

Please note: This percentage is used to calculate the Insured Declared Value (IDV) during insurance renewal.

The car depreciation rate in India depends on several internal and external factors. These elements affect how quickly your car loses value over time.

• Vehicle Make and Model - Cars from reputed brands with strong resale demand tend to depreciate more slowly. Lesser-known brands may lose value faster.
• Car’s Age - A car’s depreciation rate increases with its age. The vehicle’s physical condition, mileage, and value also depend on its age.
• Fuel Type (Petrol, Diesel, EV) - Diesel cars may depreciate faster due to rising fuel costs and regulatory changes. Electric vehicles are still evolving, so their resale value can vary. Petrol cars usually depreciate at a steady rate each year.
• Usage and Mileage - Higher kilometres on the odometer reduce value. Excessive driving lowers the resale price as it signals wear and tear.
• Maintenance and Repairs Record - A well-maintained car with a complete service history has a lower car depreciation value. A car with several bodywork or interior issues will depreciate faster.
• Modifications and Damage History - Heavy modifications or a record of accidents can significantly increase the depreciation rate on a car.
• Market Demand for the Model - Popular models hold value better. If a car model is discontinued or has low demand, the car value depreciation per year becomes higher.
• Previous Owners - If a car has been under a single ownership or had very few owners, its resale value will be higher, and its depreciation will be lower.

Understanding the car depreciation rate is valuable for both buyers and sellers in the automotive market. It helps them assess a vehicle's true value and make informed financial decisions.

• For Buyers - Buyers use depreciation to evaluate whether a used car is priced fairly. A car that has already depreciated significantly in the first few years often offers better value for money. Knowing the average car value depreciation per year gives buyers more confidence during price negotiations and prevents overpaying.
• For Sellers - Sellers rely on the 4-wheeler depreciation rate to set a realistic asking price. Overestimating a car’s value may turn away potential buyers. A clear understanding of depreciation helps sellers price competitively and close deals faster.

For both buyers and sellers, depreciation also affects loan approvals and insurance premiums. Cars with lower market value may not qualify for high loan amounts. Insurers calculate IDV (Insured Declared Value) using depreciation, which impacts coverage and claims.

Whether you are buying or selling, knowing the car depreciation rate in India helps you plan better, avoid financial surprises, and make smarter ownership decisions.

Insured Declared Value (IDV) is the maximum amount your insurance company will pay if your car is stolen or declared a total loss. It reflects the current market value of your vehicle after factoring in its depreciation. As your car gets older, its value drops, and so does the IDV.

The car depreciation rate in India directly influences IDV. A lower IDV means a lower premium, but it also reduces your claim payout. That is where zero depreciation cover, also known as bumper-to-bumper insurance, becomes helpful.

Also Read: Car Insurance IDV Calculator

What Is Zero Depreciation Cover in Four Wheeler Insurance?

Zero dep car insurance is an add-on, optional feature that ensures full claim settlement without factoring in depreciation. It covers the cost of replaced parts such as plastic, rubber, metal, and fibre during repairs. Without this cover, insurers deduct depreciation before approving your claim.

Why Zero Dep Car Insurance Matters

• You receive a higher reimbursement amount during claims.
• Ideal for new or high-value cars, where part replacement costs are high.
• It reduces out-of-pocket expenses after an accident.
• Offers better peace of mind for first-time car owners.
• Encourages timely repairs without worrying about reduced settlement.

How Zero Depreciation Cover Helps in Car Insurance Claims

A zero-depreciation add-on covers the full cost of parts replacements during claims, without depreciation deductions. It is especially useful for newer vehicles or expensive models.

While a standard policy provides basic protection based on the car value depreciation per year, adding a zero depreciation cover ensures full coverage for replacement parts. It is something every car owner should consider for better financial protection.

To estimate your car’s current value, you can use a car depreciation calculator. Simply enter details like the car’s registration number, year of manufacture, make, and model. The tool will instantly show the depreciation value.

If you prefer manual calculation, there are two standard methods used:

Prime Cost Technique

This method applies a fixed percentage of depreciation over the car’s total cost each year. It is useful when depreciation is expected to be uniform over time.

Formula:

Cost of the car × (number of days the car is owned ÷ 365) × (100% ÷ Effective life in years)

Diminishing Value Technique

This method calculates depreciation on the car’s reducing value every year. It is commonly used for tax or business accounting.

Formula:

The purchase value of the car × (number of days the car is owned ÷ 365) × (effective life in number of years ÷ 200%)

Choose the method that suits your purpose - valuation, taxation, or insurance.

• Follow Regular Servicing - Always follow the manufacturer's recommended service schedule. A full and updated service history boosts resale value.
• Drive Smoothly - Avoid rash driving, sudden braking, and overspeeding. Gentle driving habits reduce long-term wear and help the car age better.
• Limit Unnecessary Mileage - High mileage accelerates depreciation. Use the car wisely and avoid long drives when not needed.
• Keep the Exterior and Interior Clean - Regularly clean and wax your car. Fix dents, scratches, and paint damage quickly to maintain the car’s visual appeal.
• Avoid Heavy Modifications - Aftermarket accessories or non-standard changes can reduce resale interest and lower value in the used car market.
• Repair Minor Issues Promptly - Address small mechanical or electrical issues early. Neglecting them can lead to bigger problems and a faster drop in value.
• Install Quality Tyres and Battery - Replacing tyres and battery on time ensures better performance and shows the car is well-maintained.
• Choose Reliable Brands and Models - Cars with high resale demand depreciate more slowly. Opt for models known for durability and good after-sales service.
• Use Covered Parking - Protect your car from sun damage, dust, and rain by parking in a garage or shaded area whenever possible.
• Keep All Records and Documents - Maintain service bills, insurance papers, and pollution certificates. Buyers value transparency, and it helps during resale.

Understanding how the car depreciation rate affects your vehicle’s value and insurance is essential for smarter financial decisions. It influences resale pricing, loan eligibility, and your four-wheeler insurance premium.

While depreciation lowers your Insured Declared Value (IDV), opting for zero dep car insurance can help you recover more during claims. This add-on ensures full coverage without depreciation deductions.

At TATA AIG, we help you choose plans tailored to your car’s age, value, and usage. Our easy online portal makes both the fresh purchase and renewal processes simple and secure.

If you plan to buy car insurance, always evaluate if your car is new or high-value, and consider adding a zero depreciation cover. On the other hand, if your vehicle is older, timely car insurance renewal is important to maintain coverage as IDV continues to fall.

Explore our plans and renew or buy car insurance with TATA AIG today for dependable protection.