Truck Depreciation: Definition, Calculation, and Factors in 2024

Truck depreciation is a crucial concept for anyone owning and operating trucks. Understanding depreciation helps you manage finances effectively, make informed investment decisions, and optimize profits from transportation activities. So, what is truck depreciation, and how is it calculated? This article from Xe Tải Mỹ Đình will provide you with a comprehensive and in-depth look at this issue.

What is Truck Depreciation?

Truck depreciation, similar to car depreciation, is the process of valuing and allocating the cost of a truck over its useful life due to natural wear and tear, wear and tear from use, and technological obsolescence. Trucks are considered fixed assets for businesses. Calculating truck depreciation helps businesses accurately reflect the remaining value of this asset while recording the cost of using the asset in business operations, directly impacting profits and tax obligations.

For businesses with large depreciation funds or those just starting and without stable revenue, depreciation of fixed assets, especially trucks, can be an important source of funds, helping to improve financial situation. This depreciation not only helps reduce taxable profit but also creates a certain cash flow for reinvestment or covering other expenses.

How to Calculate Truck Depreciation in Detail

The calculation of truck depreciation differs between new and used trucks. Here’s a detailed guide:

1. How to Calculate Depreciation for New Trucks

For new trucks, calculating depreciation is simpler and usually based on the regulations of the Accounting Law and the current Tax Law.

According to Accounting Law: Trucks are considered fixed assets and have a depreciation period of 6 to 10 years. Businesses can choose a depreciation period that suits their actual use and policies, but the most common is 10 years.

Formula for calculating annual truck depreciation (according to Accounting Law):

Annual Depreciation Expense = Total Original Cost of Fixed Asset / Depreciation Period (usually 10 years)
According to Tax Law: The Tax Law also stipulates the depreciation rate of trucks, usually based on the time frame and depreciation rate issued. This depreciation rate may differ from the Accounting Law and is used for the purpose of calculating corporate income tax.

Formula for calculating annual truck depreciation (according to Tax Law):

Annual Depreciation Expense = (Original Cost of Asset – Estimated Salvage Value) / Depreciation Period according to Tax Law

The estimated salvage value is usually negligible for trucks, so it can be ignored in practical calculations.

2. How to Calculate Depreciation for Used Trucks

Depreciation of used trucks is more complex because the value of the truck has decreased significantly compared to new trucks. The depreciation rate of used trucks depends on the number of years of prior use and the actual condition of the truck. The longer the truck has been used, the higher the depreciation rate, and vice versa.

A common method for estimating depreciation of used trucks is to use an annual depreciation percentage. This rate usually ranges from 7% to 10% of the original value per year, but may vary depending on the type of truck, brand, and market conditions.

Formula for calculating depreciation of used trucks (estimated):

Used Truck Depreciation = (Annual Depreciation Rate %) x Remaining Value of Truck x Number of Years of Use

Example: A truck with an initial value of 1 billion VND. After 3 years of use, with an average depreciation rate of 8%/year, the estimated depreciation is as follows:

Year 1: 8% x 1,000,000,000 VND = 80,000,000 VND
Year 2: 8% x (1,000,000,000 VND – 80,000,000 VND) = 73,600,000 VND
Year 3: 8% x (1,000,000,000 VND – 80,000,000 VND – 73,600,000 VND) = 67,712,000 VND

Or you can calculate it quickly using a simplified formula:

Used Truck Depreciation = (7% – 10%) x Initial Price x Number of Years of Use.

However, this formula is for reference only and needs to be adjusted based on the condition of the truck and the market price.

How is the Depreciation Period of a Truck Calculated for a Business?

The depreciation period of a truck for a business is determined based on the type of truck and legal regulations. For new trucks, the depreciation period is usually from 6 to 10 years as mentioned above.

For used trucks, the depreciation period can be determined according to the formula in Circular 45/2013/TT-BTC:

Depreciation Period of Used Truck = (Fair Value of Truck / Selling Price of New Truck of the Same Type 100%) x Depreciation Period of New Truck of the Same Type

Example: A business buys a used truck with a fair value determined to be 800 million VND. The price of a new truck of the same type is 1.6 billion VND, and the depreciation period of the new truck is 8 years.

Depreciation Period of Used Truck = (800,000,000 VND / 1,600,000,000 VND) x 8 years = 4 years.

Thus, the business will depreciate this used truck for 4 years.

Truck Depreciation Timeframe by Year

The depreciation value of a truck decreases over time. In general, after about 25 years, the value of the truck can depreciate from 100% to 0%. However, the depreciation rate is not uniform over the years.

Years 1 – 3: The fastest depreciation rate, about 15% – 20% per year.
Years 4 – 7: The depreciation rate slows down, about 10% – 15% per year.
Years 8 – 10: The depreciation rate is stable, about 5% – 10% per year.
After 10 years: The depreciation rate is very slow, mainly the remaining value of the chassis and reusable parts.

Estimated table of the remaining value percentage of trucks according to usage time:

Truck Usage Time	Truck Value Percentage (%)
1 year	75 – 85
1 – 3 years	50 – 70
3 – 6 years	30 – 50
6 – 10 years	15 – 30
Over 10 years	Under 15

Note: This is just an estimated percentage and may vary depending on many other factors.

How Banks Value Trucks for Collateral

When a business or individual uses a truck as collateral to borrow from a bank, the bank will appraise the truck to determine the loan value. Banks typically use a combination of two main methods to value used trucks:

Market Comparison Method: The bank will research information about similar trucks being traded on the used market, including factors such as:
- Truck type, brand, model year
- Mileage
- Truck condition (engine, body, interior)
- Actual transaction prices of similar trucks
After collecting data, the bank will compile and provide an average market value for the truck being appraised.
Truck Depreciation Method: The bank will also use the depreciation method to estimate the remaining value of the truck based on usage time and appropriate depreciation rates. This method is especially useful for specialized or less common trucks on the market, where it is difficult to determine the market price using the comparison method.

Typically, the bank will combine both methods above to provide the most accurate and objective truck valuation. The loan limit usually ranges from 50% – 70% of the appraised value of the truck, depending on the policies of each bank and the borrower’s credit history.

Factors Affecting Truck Depreciation Value

Truck depreciation value is affected by many factors, including:

Usage Time: This is the most important factor. The longer the truck is used, the greater the depreciation due to natural wear and tear and reduced lifespan.
Mileage: Trucks operating with high intensity and long distances will wear out faster, leading to higher depreciation.
Truck Type and Brand: Some truck types or brands are better at retaining value than others. Trucks from reputable, quality brands are usually less depreciated.
Purpose of Use: Trucks used in harsh environments (e.g., transporting building materials, mining) will depreciate faster than trucks transporting normal goods.
Maintenance and Repair Condition: Trucks that are regularly maintained and well cared for will retain their value longer and depreciate slower than trucks that are neglected and poorly maintained.
Technology and Obsolescence: The development of automotive technology makes older truck models obsolete in terms of features and performance, leading to faster depreciation.
Used Truck Market Conditions: Used truck market prices also affect the depreciation rate. When the market is sluggish, used truck prices fall, and the depreciation rate will be higher.
Accidents and Collisions: Trucks that have been involved in accidents or collisions will have their value significantly reduced and depreciate faster.

Understanding truck depreciation and the influencing factors is very important for you to make decisions about buying, selling, using, and managing trucks effectively. Hopefully, this article from Xe Tải Mỹ Đình has provided you with useful and valuable information. If you have any questions or need more advice about trucks, don’t hesitate to contact us.

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