Buying a New vs. Used Car: Which Is Better?

Many if not most of those in the market for a car will consider whether to buy new or used. The best choice between a new car versus a used one depends on your goals and needs.

New vs. used: factors to consider

Budget and affordability. Used cars do typically cost less than new ones. But before buying either, determine how much you can afford to spend. Our car affordability calculator lets you start with the monthly payment to arrive at the maximum car price you can afford. If possible, spend no more than 10% of your take-home pay on a car loan payment and no more than 20% for total car expenses — which includes gas, insurance, repairs and maintenance.

Depreciation and resale value. Depreciation amount varies by vehicle, but according to Kelley Blue Book, most new vehicles lose 20% of their value in the first year. After that, the rate of depreciation starts to decline, so your loss when selling or trading in a used car is likely to be less than for a new one. Also, if you plan to keep a car for many years, depreciation may not be an important factor.

Financing and interest rates. Lenders offer lower financing rates on new cars because the vehicles haven’t yet depreciated and are worth more. If you default on the loan, there’s a better chance the lender can sell the car to recover losses. But interest rates from lender to lender vary, so you should always compare auto lenders to find the best rate.

Auto insurance costs. Used car insurance usually costs less than new car insurance, especially if you include comprehensive and collision coverage. Whether you buy a new or used car, compare car insurance quotes to find the best price.

Features, technology and safety. Think about your must-have features on a car and how much weight they carry in your decision. If vehicle cost isn’t a top priority for you, paying more for a new car with the exact features you want could make the most sense.

Maintenance and repairs. The warranty on a new vehicle should limit what you spend on maintenance and repairs in your first few years of owning a car. As a car gets older, maintenance and repair costs increase over time. It’s difficult to predict how much those will be, but data about the reliability of particular cars can give you an idea of which brands and models historically have fewer problems.

Pros and cons of buying a new car

If the latest features and lower maintenance costs matter the most to you, buying new may be your better choice. Trade-offs include a bigger price tag, higher insurance premiums and faster depreciation.

Pros:

• More likely to have the latest safety features and technology, either standard or at an extra cost.

• Comes with full warranty coverage for greater peace of mind. The typical car warranty is three years or 36,000 miles, but some are higher.

• If financed, interest rates tend to be lower than for used cars, often by at least a few percentage points.

• Is shiny and new without previous wear and tear. Less likely to have maintenance problems.

• Can be ordered with the customizations you want, such as color and added features.

• Often more fuel efficient and pollutes less compared to older models.

Cons:

• Usually has a higher upfront cost than a used car.

• Loses value more quickly than a used car, especially in the first few years.

• Auto insurance and registration costs are usually higher.

» MORE: Buying a new car in 7 steps

Pros and cons of buying a used car

If cost is your biggest concern — especially the monthly payment — a used car might be the best option for you. But you may have to be flexible about the type of car and features, because your selection of well-maintained, dependable cars may be limited.

Pros:

• Usually has a lower purchase price than a new car.

• Doesn’t lose value as quickly as a new car; the previous owner absorbs the biggest loss.

• Auto insurance and registration costs are usually lower.

Cons:

• Comes with no warranty coverage or only the time remaining on the original warranty. Always make sure that any time left on an original warranty can be transferred to you.

• Maintenance and repair expenses may be higher.

• Requires more due diligence — such as getting a vehicle history report or paying for an inspection.

• If financed, interest rates tend to be higher than for new cars.

• May have outdated safety features and technology.

• Can’t be ordered as custom-built.

» MORE: How to buy a used car

Comparing costs: new vs. used

The amount you pay for a car depends on many factors, but the averages in this table give you an idea of the differences when buying and financing a new versus used car.

Beyond your monthly payment, include insurance, fuel, maintenance, registration and taxes when comparing car costs. Our total car cost calculator enables you to enter numbers specific to you and cars you’re considering for comparison.

Choosing whether to buy a new or used car

There really isn’t one right answer when it comes to deciding on a new or used car. The best choice depends on the car itself; you might find a great deal on a new car or a low-mileage used car in excellent condition. It also depends on your budget, desired vehicle features and how long you plan to keep the car.