What Is Depreciation and Why It Matters for Assets You Own

You bought a car two years ago for ₹8 lakh. You’ve barely driven it — weekends mostly, garage at night, full insurance. You’re convinced it’s worth close to what you paid. Then you check the resale value and someone offers you ₹5.2 lakh. That’s not negotiation. That’s depreciation.

Depreciation is simply the loss in value of an asset over time. Some things lose value because they wear out. Some lose value just because time passes and newer versions exist. Either way, the money you spent doesn’t stay locked in that asset — it quietly bleeds out.

For most salaried Indians in their late 20s or 30s, the assets you own that depreciate fastest are also the ones you spend the most on: cars, electronics, and furniture. Understanding how quickly they lose value changes how you think about buying them.

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How Fast Does Depreciation Actually Happen?

In India, the insurance industry uses a standard depreciation schedule that gives you a rough, real-world benchmark.

A car that costs ₹10 lakh loses about 15% of its value in the first year — so it’s worth roughly ₹8.5 lakh by month 12, even if it’s spotless. By year five, it’s typically worth somewhere between ₹4–5 lakh. That’s not a crash — that’s just normal depreciation doing its thing.

Electronics are worse. A laptop you bought for ₹85,000 in 2022 is probably worth ₹35,000–40,000 today if you sold it. Phones are brutal — a ₹60,000 iPhone can lose 30–40% of its value within 18 months just because a newer model came out.

Furniture sits somewhere in the middle. A ₹1.2 lakh sofa set from a decent brand might fetch ₹30,000–40,000 in five years — if you find the right buyer.

The pattern is always the same: the sharpest drop happens early, usually in the first one to three years. After that, the decline slows down.

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Why This Should Change How You Think About Spending

Here’s the practical part.

When you spend ₹12 lakh on a new car, you’re not just paying ₹12 lakh — you’re also accepting that you’ll absorb around ₹4–5 lakh in depreciation over the next three to four years. That’s a real cost, even if no money leaves your account. It shows up the moment you try to sell.

This is why buying a two-year-old used car instead of a brand-new one is often a genuinely smart financial move — not just advice people give because they can’t afford new. Someone else already absorbed the steepest part of that depreciation curve. You buy at the bottom of the first drop and face a much gentler slope from there.

The same logic applies to phones. Buying last year’s flagship — say, a Samsung S23 at ₹45,000 instead of the S24 at ₹74,999 — isn’t settling. You’re buying an asset that’s already taken its biggest hit.

Where depreciation really bites people is when they use loans to buy depreciating assets. If you take a ₹6 lakh car loan at 9.5% interest, you’re paying interest on something that’s shrinking in value every month. By the time you finish paying, the car might be worth ₹3.5–4 lakh and you’ve paid back ₹7.8 lakh in total. That gap is real money gone.

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The One Asset That Works the Other Way

Property — specifically, land — tends to appreciate over time. A 2BHK in Pune’s Wakad area that cost ₹45 lakh in 2016 is likely valued at ₹75–85 lakh today. That’s the opposite of depreciation. It’s why physical assets are not all the same animal.

Financial assets like mutual funds can also grow — a ₹5,000/month SIP in a Nifty 50 index fund over 10 years at historical returns of roughly 12% CAGR (Compound Annual Growth Rate — the year-on-year average return that includes compounding) could grow to around ₹11.6 lakh from a total investment of ₹6 lakh.

The point isn’t to never buy a car or a phone. It’s to know clearly what you’re buying — something that grows, or something that slowly costs you money just by existing.

If you want to track how your overall net worth is stacking up across both kinds of assets, RupeeRubric’s net worth tracker is a good place to start.

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Frequently Asked Questions

Does depreciation matter if I’m not planning to sell the asset?

Yes, because it affects your actual net worth even if you never sell. If you own a car worth ₹3 lakh and a phone worth ₹20,000, that’s what those assets contribute to your financial picture — not what you paid for them. It also affects insurance claims, since insurers pay the depreciated value, not the purchase price.

Is there any way to slow down depreciation on a car?

You can slow it — but not stop it. Keeping service records updated, maintaining the car well, and avoiding high mileage all help at resale. A well-maintained ₹8 lakh hatchback with a full service history can fetch ₹1–1.5 lakh more than a similar car without one. But the baseline depreciation curve still applies regardless.

Does depreciation affect my taxes in India?

For salaried individuals, not directly on personal assets like cars or phones. Depreciation as a tax benefit applies mainly to business owners and the self-employed, who can claim it under the Income Tax Act to reduce taxable profit. If you’re salaried, it doesn’t show up in your ITR.

Why do some phones hold their value better than others?

Brand and resale demand. iPhones depreciate slower in India because the secondhand market for them is strong — buyers trust the brand and parts availability. A ₹50,000 iPhone SE might resell at ₹32,000 after two years, while a similarly priced Android flagship from a lesser-known brand might fetch ₹15,000–18,000. Resale value is worth checking before you buy.

What’s the difference between depreciation and amortisation?

They’re the same idea, applied to different things. Depreciation applies to physical assets — cars, machines, buildings. Amortisation applies to intangible assets or loans — it’s the process of spreading a loan repayment over time. When your EMI breakdown shows principal and interest, the gradual repayment of principal is amortisation in action.