It’s the choice that millions of car buyers make each year: Do you buy new or a used car to save money? Deciding between that new car smell or a pre-owned vehicle involves more than just price — but it’s an important factor.
Average payments on a new car average $738 per month while used average $532, according to Experian’s State of Automotive Finance Market for the fourth quarter of 2023.
A used car is a good choice if you are trying to save on your initial purchase. But you’ll need to consider the cost over the life of ownership — including maintenance and repairs. You may find that buying new is the better choice for your finances.
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: Used vs. new cars
There are options for scouting before you buy a new or used car. You can find new cars at a local dealership or by searching on sites like Autotrader or Edmunds.
Used cars are available through dealerships, but you can also find them — potentially cheaper — through independent dealers, private-party sellers or superstores like CarMaxor Carvana.
In general, used cars are cheaper than new cars. But both have increased dramatically in price over the last few years. New car payments have jumped from a monthly average of $554 in 2019 to $738 in late 2023, a 28.5 percent difference. Used cars also saw a drastic jump from $391 on average to $532, a 30.5 percent difference.
Kelley Blue Book and Edmunds can give you a sense of purchase 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 | $35,338 | $22,895 |
| Estimated monthly payment | $668 | $449 |
| Estimated first year of ownership maintenance costs | $140 | $1,371 |
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 weigh vehicle depreciation, safety features, reliability and your preferences.
Considerations when buying a new car
Buying a new car is a lower-maintenance investment in the newest technology.
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 can get it outfitted 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 your spending on repairs and maintenance in the first few years of ownership.
Cons of buying new
Unfortunately, buying new is more costly and comes with a few downsides that can dent your wallet.
- More expensive: New cars are often several thousand 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 when 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 because of their higher chance of theft, higher value and other related factors.
If you decide that purchasing new is right for you, plan and look out for seasonal deals. Timing your car purchase carefully and shopping for the best auto loan rates can reduce some upfront expenses.
Considerations when buying used
Used cars typically come with a lower price tag and depreciate more slowly but have other shortcomings to watch for.
Pros of buying used
With a used car, you could save money on monthly payments, insurance and other fees. Plus, depreciation will likely happen at a slower rate. Take a closer look at these key benefits below:
- Less expensive: Used vehicles’ primary benefit 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 of thousand dollars.
- Lower insurance costs and fees: Many pre-owned cars carry lower insurance rates, titling fees and sales taxes. You may save both on the lot and over the car’s life.
- 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
Buying used may require you to adjust your list of wants for your next ride, research the car’s history and spend extra funds to maintain the vehicle.
- Making compromises: You will have to search to find the style, color and add-ons you want. And even then, you may have to make compromises.
- Car history: You will also need to check the vehicle’s maintenance record to ensure that the previous owner took good care of it. Bring the car to a trusted mechanic for a used car inspection 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.
A used car is a good choice if you are trying to save money on your initial purchase. 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 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 the dealership or manufacturer.
These cars are a middle ground between used and new vehicles in terms of upfront price since you’ll pay extra for the inspection. 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 factors including financial considerations and your tastes and needs. Consider these issues when choosing which type of purchase is right for you.
And if you’re still stumped, check out Bankrate’s new vs. used car calculator for tailored advice.
Budget
Multiple costs 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. Depending on the vehicle you choose, the purchase price will also typically be less for a used car.
When you crunch the numbers to determine how much car you can afford, look beyond the monthly payment and insurance. Be sure to include annual registration fees, fuel costs, maintenance and repairs.
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.
Still, these luxuries may not outweigh the cost-savings of skipping the add-ons and buying used. If you have concerns about the safety of the vehicle you’re considering, use the tools found on the National Highway Traffic Safety Administration’s website to check the safety rating.
Maintenance needs
A 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.
But if you’re leaning toward a used car that’s no longer under warranty, this isn’t necessarily a deal breaker. You can purchase an extended warranty to get the added protection you need. The average extended warranty costs roughly $1,480, but you could spend far more or less, depending on your vehicle and the level of coverage you select.
How to find the best deal on your car
Whether you buy new or used, remember that researching the vehicle is crucial in getting a great deal. Your research should include checking the model’s safety record, insurance costs and five-year cost-to-own.
Take the time to test-drive multiple vehicles and shop around with a few sellers, getting quotes from several auto loan lenders. Seek the lowest monthly payment and most competitive financing terms to keep more of your hard-earned money in your pocket.
The bottom line
Deciding between new and used comes down to several factors, including your concerns around depreciation, budget, your determination 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 on financing before you head to the dealership for the best deal.
