depreciation
dih-pree-shee-AY-shuhn
/dɪˌpriːʃiˈeɪʃən/
A reduction in the value of an asset over time, particularly due to wear and tear or obsolescence.
In leasing, depreciation is the single most important factor; your lease payments are essentially covering the calculated depreciation of the vehicle over the term of the lease.
The story behind the word. The word comes from the Latin 'pretium', meaning 'price' or 'value' (the same root that gives us 'precious' and 'price'). By adding the prefix 'de-' (down), the Romans created 'depretiare', which literally means 'to bring the price down'.
Word relationships
- devaluation: Devaluation usually refers to a deliberate downward adjustment of a currency's value by a government, while depreciation is a natural market loss of value over time.
- decline: Decline is a general term for any downward trend, whereas depreciation is a specific accounting and financial term for loss of asset value.
- appreciation: Appreciation is the increase in the value of an asset over time (common in real estate, rare in cars).
Commonly confused with
- deprecation: Deprecation is belittling or criticizing; depreciation is a drop in monetary value.
Word family
- depreciate (verb): To diminish in value over a period of time.
- depreciatory (adjective): Tending to diminish in value.
Collocations
- rapid depreciation
- calculate depreciation
- annual depreciation
- asset depreciation
Example sentences
- "Because of rapid depreciation, a brand-new luxury car can lose up to twenty percent of its value in the first year alone." Explaining the financial downside of buying new cars.
- "The monthly lease payment is calculated based on the difference between the car's initial price and its projected value after depreciation." How lease payments are calculated.
Memory hook
Think of 'de-pricing' an item. 'De-preciation' is when the 'price' goes down. Depreciation = Decline in price.
When not to use
Do not confuse this with 'deprecation' (which means expressing disapproval of something, as in 'self-deprecating humor').
Fun facts
- While almost all cars suffer from depreciation, certain rare collector cars actually experience appreciation, becoming far more valuable decades after they were built.
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