How to use this calculator
- Enter or choose purchase cost.
- Enter or choose salvage (trade-in) value at the end.
- Enter or choose useful life.
- Enter or choose method.
- Enter or choose show year.
- The depreciation in that year updates as you type. Use Copy result or Share to keep it.
Method
Straight line = (C − S) ÷ L; Declining balance = Book × k ÷ L, switching to straight line when that is larger; SYD = (C − S) × (L − y + 1) ÷ (L(L+1)/2)
- C
- purchase cost
- S
- salvage value
- L
- useful life in years
- k
- 2 for double declining, 1.5 for 150%
- y
- year number
Worked example
- Double declining rate = 2 ÷ 10 = 20% of book value.
- Year 1: 50,000 × 20% = 10,000; year 2: 40,000 × 20% = 8,000.
- Year 3: 32,000 × 20% = 6,400, leaving a book value of 25,600.
By double declining balance, a 50,000 machine is charged 6,400 in year 3 and has a book value of 25,600 at the end of it.
What the result means
Machinery loses value fastest in its early years, which declining-balance methods reflect better than straight line. For cost-of-ownership budgets, add interest on the money tied up, insurance and housing to the depreciation.
Assumptions and limits
- Full-year depreciation from year 1, with no partial first year.
- Declining balance switches to straight line when that gives the larger charge, so the book value reaches salvage at the end of the life.
- Tax depreciation systems (such as MACRS in the US or capital allowances in the UK) have their own rates and conventions and are not applied.
Questions
Which method should I use?
For management accounts, choose the one that best matches how the machine loses market value, often declining balance. For tax, use the method your tax authority prescribes.
How do I estimate salvage value?
Look at auction and dealer prices for the same model at the age you expect to trade it in.
Please note: This calculator gives estimates for planning. It is not financial advice, and lenders’ actual terms, fees and rounding may differ.