New vs. Used

While the great feel and overall pleasure of driving a brand new car is undeniable, it almost always makes more financial sense to buy a used car.

New cars lose about 40% of their value within 3 years, at which point the depreciation starts to slow down.

With used cars, the previous owner has absorbed the biggest or steepest portion of the depreciation cycle. You buy at the beginning of the low-cost part of the car ownership cycle, and almost all of the costs of owning and operating a car will be reduced. Some of the benefits of buying a used car include:

  • Lower purchase price
  • Lower depreciation
  • No sales tax
  • Lower financing costs (in the form of fees and interest paid)
  • Lower registration and license fees (which are usually tied to the value of the car)
  • Lower insurance premiums

Besides less excitement, buying a used car (or keeping your current car) has a few downsides. The chances for expensive unwarrantied repairs are higher, reliability can be reduced, and major maintenance costs such as replacing the tires, battery, brakes, and muffler may be on the horizon. New cars also tend to have more safety equipment and better safety records.

To calculate the cost difference of new cars vs. used cars, you can use our New vs. Used Tool.