How much will my vehicle depreciate? How much will your car be worth in the future?

Since motor vehicles lose value over time, the question you need to ask before you sign on the dotted line is: "what will this vehicle be worth when I want to sell it?"

It's an important question, since two vehicles that cost the same can end up with vastly different future values.  The trick question is, "how can you predict the future value?"

And the answer is to find out the "residual value" of the vehicle you are considering.  Residual means what's left-over.  So if we are looking for the 'residual value' we are looking for the value that's left at a given time in the future.  All vehicles have a residual value; some higher than others.  The key is to know your vehicle's residual value before you buy it.

Vehicles typically depreciate 50% or more in the first 3 years.  Given that fact, use it to your advantage.  Ask your dealer what the 36-month residual value is for the vehicle you are considering.  He will give you a number - which represents the percentage of the MSPR.  So ... he might say 48.  That means that the vehicle is expected to be worth 48% of the original MSRP in 36 months.  Your goal is to find a vehicle with a 36 month residual at 50% or better.

Now, that does not mean to avoid one with a 49% or 48% value.  After all, these numbers are not guarantees; instead they are educated predictions of future value.  A residual value between 40% and 50% is good.  But most dealers would agree that a value below 40% is below average and would indicate a vehicle that has lower demand in the market.  So remember, you might not have a crystal ball, but a residual guide may be a compass directing you towards a better vehicle.