Depreciation

The decrease in value of an asset over time due to wear and tear, age, or obsolescence. In leasing, depreciation determines a portion of your monthly payment. Example: A construction company leases an excavator worth KES 8,000,000. After 5 years of heavy use it is worth only KES 2,000,000. The KES 6,000,000 depreciation is factored into the lease payments.