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6 min read Published on December 1, 2022.
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ways and pitfalls of borrowing money to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to manage their finances through providing precise, well-researched, and well-written facts that break down complicated topics into bite-sized pieces. The Bankrate promise
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There are money-related questions. Bankrate has answers. Our experts have been helping you manage your finances for more than four years. We strive to continuously provide consumers with the expert advice and tools needed to make it through life’s financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our information is trustworthy and precise. Our award-winning editors, reporters and editors create honest and accurate content to help you make the best financial decisions. The content created by our editorial team is accurate, truthful and uninfluenced by our advertisers. We’re transparent regarding how we’re in a position to provide quality content, competitive rates, and useful tools to you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods and, services, or through you clicking certain links posted on our site. This compensation could influence the manner, place and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, like our own rules for our website and whether or not a product is offered in your region or within your personal credit score can also impact the manner in which products appear on this site. Although we try to provide a wide range offers, Bankrate does not include details about every credit or financial product or service. It’s the decision millions of car buyers make each year: Do you purchase a brand new car or go with an older car for savings? Making the decision between that brand-new car smell or a used car comes down to more than just price -and it’s a significant factor. New cars cost $716 per month, whereas used cars average at $526 according to Experian’s figures for the fourth quarter of 2022. If you are trying to reduce the cost of your first purchase, a pre-owned car is a good choice. But you’ll need to consider the price over the duration of ownership, which includes the maintenance as well as repairs. You may find that buying new is the best option for your finances. Key takeaway
A new purchase is the best option if require the most recent features as well as lower initial maintenance costs. Buying used might fit better when you’re willing to compromise on some features to save on the initial purchase and insurance.
Compare the costs of new and. used cars There are many options to scope out your purchase, whether new or used. There are new cars available at local dealers or by searching on sites like or Edmunds. Used cars are available at dealerships, however you can also find them (which could be cheaper)- through independent dealers and private-party sellers, or through superstores like , or . In general used vehicles are more affordable than brand new ones. But both have increased dramatically in price over the last few years. New car payments have jumped from a monthly median of $554 in 2019 to $667 in 2022, which is an 18.5% difference. Used cars also saw an astronomical increase from $391 on average to $515 which is which is a 27.4% variation. To best prepare for the costs of owning a car- new or used -it can provide an idea of the cost of buying and maintenance costs over five years. Here’s the breakdown of prices by Edmunds for a brand new Honda Accord versus a used one. New 2022 Honda Accord EX-L
Refurbished 2017 Honda Accord EX-L
Price of the typical listing
$35,338
$22,895
Estimated monthly payment
$668
$449
Estimated first year of maintenance expenses
$140
The $1,371 monthly payments are calculated on the average rates of interest for both new and used vehicles as of Q1 2022, and a 60-month period. Maintenance and repair costs for during the initial year are based on to Edmunds. The price shouldn’t be the only factor that you take into consideration when selecting the right car. It is also important to consider depreciation security features, reliability, and your preferences. Things to consider when purchasing a new car. Buying a brand new car is a lower-maintenance investment that is based on the most recent technology. The advantages of buying a new car is equipped with a variety of options including many that you get to pick if you can find the right dealer. Customization: One of the main benefits of buying a new car is that you can have it customized to suit your needs — you can select the color and design you prefer and ask for any extras that you like. Modern technology offers practical benefits also — you’ll be driving away with the most recent technology as well as safety equipment. Higher interest rates: With a new car purchase, you are more likely to receive an interest rate that is better for an auto loan than you would with an used vehicle purchase usually by a few percentage points. Reliability: You won’t have to worry about any issues with your mechanical system when you buy new. In addition, you can limit the amount you spend on maintenance and repairs in the initial months of owning. Cons of buying new Unfortunately buying a new vehicle is more expensive and comes with a few downsides that can dent your budget. The cost is higher new cars are typically several thousands of dollars more expensive than older counterparts, which can make a down-payment or monthly loan payments more difficult to manage. Depreciation: There’s also the issue of to contend with , or the rate at which your car decreases in value. The saying goes that new cars are worthless as soon as you take them off the lot. That means that new vehicles will lose 20 percent of their value within the first year, and depreciation will continue for the first 10 years of ownership. More expensive insurance costs new cars typically cost more to insure because of their greater risk of theft, higher value and other related aspects. If you decide that is the right choice for you, make sure you plan your budget and be aware of . It is important to plan your purchase in advance and can reduce some upfront expenses. When buying used, you should consider the following considerations. vehicles typically have the lowest price and are more depreciating, but they have other issues to look out for. Benefits of purchasing used a used car, you will save money on your monthly payment, insurance and other charges. Furthermore, depreciation may occur at a slower pace. Take a closer look at these key benefits below Cheaper The main benefit is the fact that they are generally more affordable than their brand new counterparts. The same model you want a few years old could help you save thousands of dollars. Reduced insurance costs and fees Some pre-owned vehicles have less titling, registration and sales tax. You may save both on the lot and over the course of the car’s lifespan. Depreciation is slower: used vehicles also appreciate more slowly. Rather than losing 20 percent of their value within the first year of ownership, a three-year-old car would likely just lose 10 percent. Cons of buying used may make you adjust your list of wants when you are ready to purchase your next car and research the history of the car and spend extra funds to maintain the vehicle. Making compromises: You’ll have to search to find the style, color and you’re looking for. And even then, you may need to compromise. The auto market is extremely competitive at the moment and you may not be able to tick all the box. Car history: You’ll have to also check the vehicle’s maintenance record to make sure you know that previous owners took good care of it. It is recommended to take the vehicle to a reputable mechanic for a routine checkup- including a brake check and engine test prior to concluding any deal. Expect to pay around $100 for the work of the mechanic however, it’s worth it. More expensive maintenance costs even if your car is in relatively good condition an older car will inevitably need more repairs and maintenance in the future. This could reduce the savings you get from your initial purchase, so you should consider your long-term budgeting when selecting new versus used. If you’re looking to lower the cost of your initial purchase, a pre-owned 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 alternatives If you’re leaning toward purchasing used, but aren’t sure about relying on the history of the vehicle then a certified pre-owned vehicle is an excellent choice. A certified used car is a used car that has been subjected to a thorough examination by the dealer or the manufacturer. These cars are a middle ground between new and used vehicles in terms of cost upfront since you’ll pay extra in order to get the check. This extra certification is ideal for drivers who want the safety of a vehicle that is in good condition, but with the cost of a brand new car. What should you consider when deciding between a brand new or used car Deciding between a new or used car comes from a combination of financial considerations and your tastes and preferences. Consider these issues when choosing the type of vehicle that is right for you. Budget Multiple costs are often lower when you buy an older vehicle instead of an entirely new model. Everything from the to dealer fees are less costly when you buy a used vehicle. Based on the car you pick the cost of buying it will typically be lower for a used car. When you calculate the numbers to figure out how much car you can afford take a look beyond the monthly payment and insurance. Make sure you include annual registration costs, fuel expenses, maintenance and repairs. Bells and whistles One advantage of buying a brand new vehicle is that it’ll come with modern technology in safety and technology. Additionally, if being in a position to choose a specific vehicle color or interior finishes is important to you, a new car purchase can make this easier. If you are buying a used vehicle it is possible to do a lot of trying to find precisely what you desire. Still, the luxury of choosing the best tires, sound system or seating may not outweigh the cost savings by avoiding these accessories and instead purchasing used. If you’re concerned regarding the security of the car you’re thinking about buying you should use the tools available on the to check its safety ratings. Maintenance needs An older model might have more expensive maintenance expenses, which is a crucial consideration when you’re on a tight budget for household expenses. The majority of the maintenance involved with a brand-new car will likely be under warranty. But if you’re leaning toward a used car that’s no longer covered by warranty, it’s not a deal breaker. You may be able to obtain the extra protection you require. The average extended warranty cost roughly $1,480, but you can pay more or less, based on your vehicle and the coverage you choose. How to find the best price on your vehicle, whether you decide to buy the new model or used one, remember that research into the vehicle is the most vital element in . Your research should include checking the model’s safety record, insurance costs and the cost-to-own for five years. Make sure to assist you in making the right choice. Also, take the time to test-drive multiple vehicles and shop around with a couple of sellers by getting estimates from several . Be sure to get the lowest monthly cost and most competitive financing terms to keep more of your hard-earned money in your pockets. The main thing to consider is whether you want new and used is a matter of balancing to a variety of factors, such as the concerns you have regarding depreciation, budget, your decision to purchase specific features, and the length of time you’re planning to keep your vehicle. When you’ve got a car in mind, shop around prior to heading to the dealer for the best deal. Learn more
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the ins and outs of securely taking out loans to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain confidence to manage their finances through providing clear, well-researched details that cut complicated subjects into bite-sized pieces.
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