General Depreciation System - GDS

You buy a car for $25,000. The minute you drive the car off the lot, it begins to lose value. Your car depreciates at a rate of 15% every year. The depreciation deduction for the first year would be $3,750. Your car lost $3,750 in value in one year, making it now worth $21,250.

The value of depreciation is compared against the value of the car each year. The next year, instead of your car being worth $25,000, it is now worth $21,250, which will make the deduction for the second year $3187.50, and so on and so forth.

Knowing that your car loses value each year by 15%, you can figure out how much it will be worth in 5 or 10 years.