How is vehicle depreciation calculated over time?

Vehicle depreciation is typically calculated by using a method that reflects the loss of value over time. The correct way to understand vehicle depreciation in this context is that it is commonly determined by reducing the purchase price by a certain percentage on a consistent basis, often monthly or annually.

In the case of option B, this suggests a straightforward approach where the vehicle’s initial purchase price is reduced by a fixed percentage each month, leading to a predictable decrease in value over time. This aligns with common practices in accounting where a vehicle loses a defined portion of its value regularly due to wear and tear, obsolescence, and changes in the market environment.

In contrast, other options involve inaccurate methods. For instance, option A proposes a uniform deduction from the selling price, which does not account for the actual depreciation of the asset over time and may not reflect real market conditions. Option C mentions comparing current value to market value, which can be part of evaluating depreciation but does not comprise a standardized calculation methodology. Finally, option D suggests estimating a future sales price without a consistent formula, which is less reliable for determining depreciation.

Thus, reducing the purchase price by a consistent percentage each month provides a clear, standardized approach to calculating vehicle depreciation.