Predicting What a Used Car Will Be Worth

This Simple Formula Gives Rough Guideline for Used Car Values

Saleswoman and woman looking at car in showroom
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Absolutely have your eye on a new car or truck that has been just been introduced, but you know you can’t afford it new? Well, there is a simple formula for predicting what a used vehicle is going to be worth three years down the road.

Important Factors in the Purchase of a New Car

The first fact to consider is almost all used cars, trucks, SUVs and crossovers lose a minimum of 24 percent of their value after 12 months.

That’s based on the Manufacturer Suggested Retail Price or what most of us know as MSRP from countless commercials.

To keep things simple, a new car costing $20,000 would be worth $15,200 after one year. So say the folks from Black Book ( It sounds like a dating site, but it’s actually the number one resource for predicting a car’s residual value when it goes on sale. That’s extremely important for setting leasing rates.

Then, from the basic 24 percent drop in value, you can start deducting 6 percent a year. A decent used car, introduced with the price of $20,000, would have an estimated value breaking down this way:

  • After 12 months: $15,200
  • After 24 months: $14,288
  • After 36 months: $13,430
  • After 48 months: $12,624.

Of course, this formula will not work 100 percent of the time because some cars and trucks have residual values that drop like stones after 12 months. Case in point would be the Chevy HHR and what happened back to it in 2009.

[Probably a good reason we no longer see this utility van on the market anymore.]

  • 2009 Chevrolet HHR LT - $20,729
  • 2008 Chevrolet HHR LT - $11,225 dealer price, according to

That’s a drop of 46 percent in one year. Wait two years and you’re looking at a $10,551 vehicle. Proving pretty much if you want a Chevy HHR, buy a used one.

You are going to save a ton of money.

Things are also getting a little tricky as 2015 turns into 2016 because residual values are changing as more used cars become available after a steady string of rising new car sales. (After all, any used car you buy starts as a new car.)

As we reported in the article, How To Use Depreciation To Buy a Used Car, used trucks decreased in value by 9 percent in 2015. Cars dropped by a significantly more dramatic 18.2 percent to end 2015. So, there are going to be some basic changes in the formula.

Does this mean you should throw the formula above out the window? Actually, no because it will give you a conservative estimate on what a new car will be worth used in a few years' time. You will find yourself in the position of having more money than you need to buy a particular used car. There's nothing wrong with that.

Use this basic formula to help you get started on what the value of a used car should be. It will save you from spending too much on your next used car or it will help you put aside the right amount if you’re a good saver!