Depreciation percentage formula is an important business tool used to account for the wear and tear of assets over time. It’s a mathematical calculation that determines the yearly depreciation rate or loss in value of any long-term asset, such as a vehicle or a machine. By factoring in an appropriate rate of depreciation each year, businesses can accurately predict future costs associated with these assets. The formula is simple: Depreciation Percentage = (Cost of Asset – Residual Value) / (Useful Life in Years). So if you own a van with a cost of $20,000 and it has a residual value of $2,000 after five years of use, your annual depreciation rate would be ($20,000 – $2,000) / 5 = $3,600.