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Should you buy a new or used car?

Couple looks at a car at a dealership
Peter Cade/Getty Images
Couple looks at a car at a dealership
Peter Cade/Getty Images
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It’s the choice that millions of car buyers make each year: Do you buy a brand-new ride or opt for an older car to save money? Deciding between that new car smell or a pre-owned vehicle comes down to more than just price — but it’s an important factor. Driving new costs on average $648 per month while used averages at $503, according to the Experian Q1 2022 State of Automotive Finance Market. 

Car Outline
Key takeaway
Buying new can be a good choice if you want the latest features and cheaper initial maintenance costs. Buying used might fit better if you are willing to compromise on some features to save on the initial purchase and insurance.

Compare costs: New vs. used cars

There are a few options when it comes to scouting out your purchase, be it new or used. You can find new cars at a local dealership, or by searching on sites like Autotrader or Edmunds. Used cars are available through dealerships as well, but you can also find them — potentially cheaper — through independent dealers, private-party sellers or superstores like CarMax, Vroom or Carvana.

In general, used cars are cheaper than new cars, which is why many borrowers choose a model that’s a few years old. But both have increased dramatically over the last few years. New car payments have jumped from a monthly average of $554 in 2019 to $648 in 2022, a 17% difference. Used cars also saw a drastic jump from $391 on average to $503, a 28.6% difference.

To best prepare for the cost of owning a vehicle — new or used — Kelley Blue Book and Edmunds can give you a sense of purchase costs and five-year maintenance costs. Here’s a price breakdown from Edmunds for a brand-new Honda Accord versus a used one.

New 2022 Honda Accord EX-L Used 2017 Honda Accord EX-L
Typical listing price $31,066 $22,444
Estimated monthly payment $573 $462
Estimated first year of ownership maintenance costs $133 $1,212

Monthly payments are based on the average interest rates for new and used vehicles as of Q1 2022 and a 60-month term. Maintenance and repair costs for the first year of ownership are according to Edmunds.

Price shouldn’t be the only factor you consider when selecting a car. You should also factor in vehicle depreciation, safety features, reliability and your own personal preferences.

Considerations when buying a new car

A graphic displaying the pros and cons of buying a new car

 
Buying a new car is an investment in the newest technology and typically a lower maintenance one than buying a used car.

Pros of buying new

A new car comes with a range of features — many of which you get to pick if you can find the right dealership.

  • Customization: The primary benefit of buying a new vehicle is that you will be able to get it outfitted exactly to your preferences — you can select the color and style you want and request any add-ons that appeal to you. 
  • Current technology: There are practical advantages too; you will drive off with the latest technology and safety features. 
  • Better interest rates: With a new car purchase, you are also more likely to get a better interest rate on an auto loan than you would with a used car purchase, often by a few percentage points.  
  • Reliability: You won’t have to contend with any potential hidden mechanical problems when you buy new. Plus, the vehicle’s warranty should limit the amount you spend on repairs and maintenance in the first few years of ownership. 

Cons of buying new 

Brand new also comes with a few downsides. 

  • More expensive: New cars are often several thousands of dollars more expensive than their used counterparts, which could make a down payment or monthly loan payments harder to afford. 
  • Depreciation: You’ll also have to contend with vehicle depreciation, or the rate at which your car loses value. As the saying goes, new cars lose value as soon as you drive them off the lot. Experian estimates that new cars lose 20 percent of their value in the first year, and depreciation continues for the first 10 years of ownership. 
  • Higher insurance costs: New cars often cost more to insure. This is because there is a higher chance of theft, along with their higher value and other related factors.

If you do decide that purchasing new is the right choice for you, plan and look out for seasonal deals. Timing your car purchase carefully and shopping around for auto loan rates can soften some of the upfront expenses.

Considerations when buying used

A graphic displaying the pros and cons of buying a used car

 
Used cars typically come with a lower price tag and depreciate much slower but have other shortcomings to watch for.

Pros of buying used

When considering buying a used car, take these benefits into account.

  • Less expensive: One primary benefit of used vehicles is that they tend to be less expensive than their new counterparts. Getting the same model you want a few years old could save you a couple thousand dollars. 
  • Lower insurance costs and fees: Many pre-owned cars carry lower insurance rates, titling fees and sales taxes. This can save you both at the point of purchase and over the life of ownership. 
  • Slower depreciation: Used cars also depreciate much more slowly. Rather than losing 20 percent of its value in the first year of ownership, a three-year-old car would likely only lose close to 10 percent.

Cons of buying used

With that said, buying used may require some extra legwork.

  • Making compromises: You will have to search to find the exact style, color and add-ons that you want. And even then, you may have to make some compromises. The car market is extremely competitive right now, and you may not be able to tick every box. 
  • Car history: You will also need to check the vehicle’s maintenance record to ensure that the previous owner took good care of it. It’s wise to bring the car to a trusted mechanic for a checkup — including a brake check and engine test — before closing any deal. You can expect to pay about $100 for the mechanic’s efforts, but it is well worth it. 
  • Increased maintenance costs: Even if the car is in relatively good condition, a used car will inevitably need more maintenance and repairs over time. This could eat into the savings you get from your initial purchase, so consider your long-term budgeting when selecting new versus used.

If you are trying to save money on your initial purchase, a used car is a good choice. But you’ll need to take into account the cost over the life of ownership — including maintenance and repairs.

Certified pre-owned options

If you’re leaning toward buying used but are still hesitant about trusting the vehicle’s history, a certified pre-owned vehicle is a great choice. A certified pre-owned car is a used car that has undergone a complete inspection by a dealership or the manufacturer.

These cars serve as a middle ground between used and new vehicles in terms of upfront price, since you’ll pay extra for the inspection. However, this additional certification is perfect for a driver who wants the security of a car in mint condition without the price tag of a brand-new vehicle.

How to choose whether to buy a new or used car

Deciding between a new or used vehicle will come down to a variety of factors, including financial considerations and your personal tastes and needs. Here are some of the issues to consider when choosing which type of purchase is right for you.

  • Budget: The variety of costs associated with a car are often cheaper when you buy a used vehicle rather than a new one. Everything from the price of car insurance to dealer fees will be less expensive when you buy a used vehicle. And, depending on the vehicle you choose, the purchase price will also typically be less for a used car.
  • Bells and whistles: One of the benefits of buying a new car is that it will include the latest technology and safety features. What’s more, if being able to select a specific vehicle color or interior finishes is important to you, a new car purchase will make this easier. When purchasing a used car, you may have to spend a long time searching to get exactly what you want.
  • Maintenance needs: A car that is slightly older may have higher maintenance costs, which is an important consideration if you have a limited household budget. Much of the maintenance associated with a new car will likely be under warranty.

How to find the best deal on your car

Whether you decide to buy new or used, remember that researching the vehicle is the most crucial element in getting a great buy. Your research should include checking the model’s safety record, insurance costs, five-year cost-to-own. There are also calculators you can use to help make a decision.

You should also take the time to test-drive multiple vehicles and shop around with a few sellers, getting quotes from a few auto loan lenders to ensure that you are getting the lowest monthly payment possible.

The bottom line

Deciding between new and used comes down to a number of factors, including your concerns around depreciation, budget, whether you’re set to have certain features and how long you plan on having your car. Once you have a car in mind, shop around and get preapproved for financing before you head to the dealership.

Learn more

Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by
Auto loans editor
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