Predicting What a New Car Will Be Worth Used

This Simple Formula Roughly Predicts Future Values

Saleswoman and woman looking at car in showroom
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If you have your eye on a certain car but can't afford it new, here's a way to calculate its projected value in a few years' time. It's a simple formula, and it will tell you what you can roughly expect to pay once today's new car is moved to tomorrow's used car lot.

A Quick Drop in Value

The first fact to consider when buying a new vehicle is that almost all cars, trucks, SUVs, and crossovers lose a minimum of 24 percent of their value, based on the Manufacturer Suggested Retail Price, or MSRP, after 12 months. This is according to the folks who run the website Black Book. It sounds like a dating site, but it’s actually the No. 1 resource for predicting a car’s residual value when it goes on sale. That value is extremely important to those in the industry who set leasing rates for used cars—and it will also help you figure out what you can plan to spend in the future.

The Formula

That means that a new car that costs $30,000 would be worth $22,800 after one year. From that 24 percent drop in value, expect to deduct 6 percent a year thereafter. Which means the estimated value for a used car in great condition, whose MSRP was $30,000, would break down in roughly this way over the course of four years:

  • After 12 months: $22,800
  • After 24 months: $21,432
  • After 36 months: $20,147
  • After 48 months: $18,939

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. A good case in point would be the Chevy HHR station wagon, which was in production from 2005 to 2011. Sales were so poor in 2009 that the vehicle was pulled from Chevy's lineup after the 2011 models hit the showroom floors. According to the car pricing and sales website Edmunds.com, the 2008 Chevrolet HHR LT that retailed for $20,729 was worth nearly half that a year later, a whopping $11,225. Which was bad news for the seller, but good news for the buyer.

Exceptions to the Rule

Things also got a little tricky as 2015 turned into 2016 because residual values changed due to a steady string of rising new car sales. In this case, depreciation values were even more of a boon to used car buyers, as used trucks decreased in value by 9 percent after the first year and cars dropped by a significantly more dramatic 18.2 percent.

According to the online magazine Automotive Fleet, used values for 2017 and 2018 were also all over the place. Used car prices started off the year higher than normal due to several hurricanes that had led to a higher demand for replacements vehicles, and yet were expected to drop by the end of the year.

Does this mean that 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, allowing you to set aside money in savings for the purchase. If you're a seller, it will give you a good idea of what you can expect to net for your vehicle.