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Predicting What a Used Car Will Be Worth

Simple Formula Gives Rough Guideline for Used Car Values


Predicting What a Used Car Will Be Worth

The 2009 Chevy HHR LT is a bad new car value because its value depreciates rapidly in the first year. However, it could be considered a great used car value for the exact same reason.

Photo © GM

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.

The first fact to consider is almost all used cars, trucks, SUVs and crossovers lose a minimum of 24% of their value after 12 months. That’s based on the Manufacturer Suggested Retail Price.

To keep things simple, a used car costing $20,000 would be worth $15,200 after one year. So say the folks from Black Book (www.blackbookusa.com). It sounds like a dating sight, 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% drop in value, you can start deducting 6% 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% 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.

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

That’s a drop of 46% 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.

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!

Related Video
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How to Buy a Used Car

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