I borrowed a used item (used as in the condition it was when i got it) from my friend and it got damaged and I plan on paying for it however it was not in good condition when I got it so my question is do I pay for a new one or do i pay the value of what its worth now?
According to the way the question is presented, it seens that the halacha would be the following. If the item that you damaged was not new then the amount of the damage was only of a used item. Therefore halachically what has to be paid is the difference in the items value between before you damaged it and afterwards.
This is what the person has to pay halachically, however on the other hand, it would be correct for him to make sure that the person he damaged will be at peace with him, and make sure to keep the peace.
CH”M 387-1, 403-1.