Should I Buy a New or Used Car?
The average vehicle lifespan is over 12 years, according to the Bureau of Transportation Statistics. The average car also loses half of its value in the first three years. So when you purchase a three-year-old car, generally, you’re paying only half of its original price for way more than half of its remaining lifespan.
But there are other factors to consider if you’re trying to choose between buying new or used. For example, buying a new car means you can have that vehicle for its whole life, and you’re in control of its maintenance the whole time.
Ultimately, you should buy the car that fits your budget and your needs.
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Compare new vs. used cars
Once you use an auto payment calculator and have a budget in mind, compare new and used cars. The traditional, sage advice is to get a used car of a high trim. For example, if you can afford a new vehicle that doesn’t have many bells and whistles, you could instead buy a used one with all the bells and whistles.
Start by figuring out what’s important to you. Maybe you prize that new-car smell over a panoramic moonroof, or perhaps a large, used model is better than a smaller new one.
On average, the monthly payment for a new car in 2022 is $667; the average used-car monthly payment is $515, according to Experian’s State of the Automotive Finance Market report. If you want to research specific cars, Kelley Blue Book provides a more complete picture with their 5-year cost-to-own estimates.
Pros and cons of buying a new car
Pros
More choices. Despite the fact that there are a greater number of places to buy a used car, you may have to sacrifice the exact paint color or features that you want. A dealership, on the other hand, will most likely have the exact new car you’re looking for or at least be able to get it. A new car can be ordered with the precise combination of model, color and features you want.
Lower financing costs. Automakers offer deals on new cars, including rebates and 0% APR financing for those with great credit. Even if you don’t qualify for a promotional deal, most lenders offer the lowest rates to those who buy the newest cars.
Latest tech. Newest technology could mean state-of-the-art fuel efficiency and advanced safety features in addition to drool-worthy infotainment and connectivity, such as Mercedes-Benz’s 56-inch touch screen that runs almost the entire width of the car.
Less maintenance. New cars are less likely to need as much maintenance as used cars do. Dealers often offer a free two-year maintenance package, too, so your oil changes and such are covered for that time.
More warranty. You get to start the clock on the car’s warranty. Some manufacturer warranties only apply to the first owners, so you will get more warranty bang for your buck. For example, Kia offers a 10-year, 100,000-mile powertrain warranty that drops to five years and 60,000 miles for subsequent owners.
Cons
While there are only a couple of cons here, they’re big ones.
More expensive. The saying that a new car loses 10% of its value as soon as you drive it off the lot is close to being true. New vehicles generally depreciate 20% in their first year of use. That’s a big financial hit to take, especially if you don’t plan on keeping the vehicle for its entire lifetime.
Risk of being underwater. You become “underwater” or “upside down” on a car loan when you owe more on the vehicle than what it’s worth. You can avoid this by making a large down payment. But this can be a problem if you total the car and don’t have GAP insurance or if your life changes and you need a different vehicle.
Pros and cons of buying used
Pros
Lower costs. Not only will you pay a lower upfront cost for a used car, but you’ll likely borrow less money, have lower insurance costs and pay lower registration fees. Of course, dealer fees still apply.
Less depreciation, higher resale value. Since the car already took its biggest hit in depreciation during the first year, its value is more stable. Its resale price will be closer to what you paid for it and you shouldn’t have to offer a tremendous down payment to keep it above water.
More affordable features. Since you aren’t spending your money on depreciation, you may be able to afford amenities like leather seats and a premium sound system.
Less cosmetic stress. Because the car is used, you aren’t likely to shed tears the first time a shopping cart nicks the paint job or a cup of coffee spills on the carpet.
Cons
Less warranty. Even though used cars may have some of their original factory warranty remaining, you would likely need to purchase an extended warranty to get the same coverage as a new car.
Guesstimated history. There are plenty of ways to research a used car, but there may be some blank spots in a vehicle’s history even after diligent research. An accident may not have been reported on the CarFax or the previous owner may not have changed the oil often. The best used cars will show a complete maintenance history.
Certified pre-owned cars: a middle ground
If you can’t choose between a new and a used car, consider a “slightly used” car: a certified pre-owned (CPO) vehicle.
A CPO car is a used vehicle that meets the manufacturer’s standards. It has to be within a certain age and mileage limit, be mechanically sound and show only slight wear and tear to get the CPO seal of approval, along with a free extended warranty.