# How to calculate depreciation?

I am not accountant and my question could be trivial but I will ask it.

Let's say that I bought a car that cost \$50,000. The maintenance cost over 5 years is \$25,000. The revenue of the car over 5 years is 35,000. What is the current book value of the car after depreciation, if the car depreciate at 10% per year.

After one year the book value would be \$50,000 - \$5,000 (10%) = \$45,000.

After year two the book value would be \$45,000 - \$4,500 (10%) = \$40,500.

And so on, until after the fifth year the book value would be approximately \$29,524.50.

You basically deduct 10% off the new book value each over the 5 years.

• So maintenance cost and revenue has nothing to do with the depreciation? – OOzy Pal Jan 30 '16 at 20:56
• No they don't. If using the car for business the depreciation could be used as a deduction to reduce the tax you pay on the income produced through your business. The maintenance costs could also be used in the same way as a deduction to reduce the tax on the income produced. – Victor Jan 30 '16 at 20:58
• So book value is the value of the car after detecting depreciation cost, right? – OOzy Pal Jan 30 '16 at 21:00
• How about net book value? – OOzy Pal Jan 30 '16 at 21:02
• Book value is what you can expect to get for the make/model of the car, that may be more or less than the depreciated value as well as more or less than what you can actually get -- there is no connection between any of them. Say some movie star goes on a rampage with a baseball bat, practically destroying the vehicle. Your car may now be a collectors item, worth millions, while the book value says it's worth 750 (extremely poor condition), and the depreciated value says it's worth 1250. – jmoreno Jan 30 '16 at 22:36