The penny test is the most famous tire-tread check there is, but it's only telling you one thing: whether your tire is legally worn out. There's a better test that catches you several thousand miles earlier — when you should be shopping, not panicking.
The penny test (2/32)
Insert a penny into the tread groove with Lincoln's head pointing down. If you can see all of Lincoln's head, your tread is at or below 2/32 of an inch — the legal limit in most states. The tire needs to come off the car.
The quarter test (4/32)
Same idea, with a quarter. Washington's head down. If you can see all of his head, your tread is at or below 4/32. The tire is still legal but Consumer Reports and most safety engineers recommend replacing at this depth, because hydroplaning resistance drops off rapidly between 4/32 and 2/32.
Use both
The quarter test tells you it's time to start shopping. The penny test tells you it's overdue. There's typically 5,000 to 10,000 miles between the two readings — enough time to find a good deal.
Don't forget the wear bars
Look between tread blocks for short raised ridges running across the grooves. Those are the manufacturer's wear bars and they sit at 2/32. When they're flush with the tread, you've hit legal wear without needing a coin.
Test in multiple spots
Tires don't wear evenly. Test in three places across the tire face — outer shoulder, center, inner shoulder — and at three points around the circumference. If any one spot is at the limit, the tire is at the limit, regardless of what the rest looks like.
What about a tread depth gauge?
A purpose-made gauge costs $4-$8 and gives you a number in 32nds. If you're comparing used tires, planning rotations, or just like having exact data, it's worth owning. The coin tests are for when you don't have one in hand.
Lincoln means stop driving. Washington means start shopping.