Residual Value Calculator ... And How To Use
It To Help Decide What Used Car
To Buy Today
Cars.com has a great free car value tool that fills in another piece of the "which is the right car for me" puzzle. Check out this Residual Value Tool before buying your next car. (UPDATE: This calculator is no longer available and there doesn't seem to be another anywhere online. I will update if that changes.)
Here's How It Helps:
These values are provided by Automotive Lease Guide (ALG) and calculate the trade-in value of a leased car sometime in the future (2 to 5 years). (UPDATE: ALG has the only car residual value calculator I can find but they charge $100 for a subscription --- you may try calling or emailing a dealer for a vehicle's residual value and then do the calculation described below.) Your lease payment is then based on the difference between this value and the current retail price of the vehicle.
From looking at a few examples, I believe the results are on the low side. And understandably so from the lessor's perspective. They don't want to lose money on the trade down the road. But it still presents one more tool to help you select the right car.
Wouldn't you like to know what your car's "conservative" trade-in value will be a few years down the road? Wouldn't you like to know what "experts" think will happen to the value of your car over time? Most definitely!
Your vehicle's future value at the time you sell it or trade it in will ultimately determine whether you got a good deal on your purchase today. And how does the expected depreciation of the car you're planning to buy compare with other comparable models?
Afterall, if one vehicle retains 50% of its value over the next three years and another retains 40% of its value, this should impact the price you're willing to pay for either vehicle today ... or help determine whether you want to keep considering a particular vehicle for purchase or not.
This car value calculator is meant to be used on new cars, but it also can be used as a price gauge on used cars as well.
So, by all means, go ahead and use it if you're planning to buy a new car.
But because the only way to have gotten these numbers in the first place was to have used historical price data, this information also gives us a "worst case" idea of a used car's trade-in value.
For example, lets say you were thinking of buying a new Ford Fusion sedan. You check the residual value and see that it is expected to retain 56% of it's value after three years. Since the data is based on historical prices, you get the original MSRP (Manufacturer's Suggested Retail Price) from a site like Edmunds.com, among others.
Let's say it was $26,000. That would mean it's current trade-in value would be $14,560 (28,000 x .56). So, the wholesale value of a used 3-year-old model may be right around $14,500.
While this may not be perfect, it gets you to a ballpark number that is workable in your planning, giving you an idea of what a 3-year-old Focus S's trade-in value is, and therefore, an idea of what you'd be willing to pay for it retail.
And you can also use this data to compare models before purchasing. For example, last I checked a base new Acura TL was expected to retain 54% of its value over 3 years, a Hyundai Accent GLS sedan should retain 50% of its value, while a Dodge Charger SXT was expected to retain 44%. And since this is based on historical data, it tells you how these cars have depreciated in the past ... valuable information.
Anyway, play around with this tool on vehicles you're interested in and see what you learn. Hope it's useful.
Wishing you happier car hunting! - Josh
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