In brief
Depreciation spreads the cost of a purchased vehicle over its normal useful life. It applies to owned vehicles, not leased vehicles.
How is vehicle depreciation calculated?
The purchase cost is spread over the vehicle's normal useful life, as set out in the official German depreciation schedule. Straight-line depreciation in equal annual amounts is common. In the year of purchase, depreciation is calculated by month.
How do depreciation and residual value differ?
Depreciation is an accounting and tax figure; residual value is a market figure. The two can differ considerably. A fully depreciated vehicle may still have significant market value, while its market value may also fall faster than its book value.
For fleet decisions, market value matters. For the balance sheet, depreciation matters.
Why does this distinction matter when comparing leasing and buying?
Buying and leasing spread costs over time differently and affect the balance sheet in different ways. A purchase creates an asset that is depreciated; leasing creates ongoing expenses.
Neither depreciation nor the lease payment alone is enough to compare two offers. The total cost of ownership over the planned holding period provides a more useful comparison. Check the accounting treatment with the finance team, as it depends on the contract terms.
Further reading
Fleet Management Without Excel Spreadsheets
With the AZOWO Mobility Cloud, you can keep track of your vehicles, costs, and obligations all in one place.
Book a free product demo