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6 min read Published December 01, 2022
Written by Rebecca Betterton Written by 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 taking out loans to buy an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers to manage their finances by providing concise, well-researched and accurate information that breaks down otherwise complicated subjects into digestible pieces. The Bankrate guarantee
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If you have questions about money. Bankrate can help. Our experts have helped you understand your finances for more than four years. We are constantly striving to provide consumers with the expert advice and tools needed to make it through life’s financial journey. Bankrate follows a strict , so you can trust that our information is trustworthy and accurate. Our award-winning editors and reporters provide honest and trustworthy content that will help you make the right financial decisions. Our content produced by our editorial team is factual, objective and uninfluenced from our advertising. We’re transparent about the ways we’re capable of bringing high-quality content, competitive rates, and useful tools to our customers by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products or services, or when you click on specific links that are posted on our site. Therefore, this compensation may influence the manner, place and in what order items appear within listing categories in the event that they are not permitted by law for our mortgage, home equity and other home lending products. Other elements, such as our own proprietary website rules and whether or not a product is available in your region or within your self-selected credit score range can also impact the manner in which products appear on this website. While we strive to provide a wide range offers, Bankrate does not include details about every financial or credit product or service. This is the decision that millions of car buyers make every year: Should you purchase a brand new car or opt for an older car to save money? Making the decision between that brand-new car smell or a pre-owned vehicle is more than pricehowever, it’s a crucial element. Driving new costs $716 per month, whereas used cars average at $526 according to Experian’s figures for the fourth quarter of 2022. If you’re trying to save money on your initial purchase, a second-hand vehicle is an excellent option. But you’ll need to consider the cost over the life of ownership, which includes maintenance and repairs. It could be that buying new is the most cost-effective option for your budget. Key takeaway
A new purchase is the best option if require the most recent features as well as cheaper initial maintenance costs. It is possible to buy used in the event that you’re willing to compromise on certain features in order to save money on the initial purchase as well as insurance.
Compare prices: New vs. used cars There are options for scouting for your next purchase, brand new or pre-owned. You can find new cars at a local dealership or by searching on sites like or Edmunds. Used cars are available through dealerships, but you can also find them — potentially cheaper -via independent dealers, private-party sellers or superstores such as . In general the case of used cars, they are less expensive than new cars. But both have increased dramatically in value over the past few years. The cost of new cars has risen from a monthly median of $554 in 2019 and $667 in 2022, which is an 18.5 percentage difference. Also, used cars experienced a drastic jump from $391 on average to $515 which is a 27.4 percent variation. In order to be prepared for the cost of owning a car- new or used — and can give you an idea of the cost of buying and five-year maintenance costs. Here’s a price breakdown by Edmunds for a brand-new Honda Accord versus a used one. New 2022 Honda Accord EX-L
Pre-owned in 2017 Honda Accord EX-L
Typical listing price
Estimated monthly payment
Estimated cost of the first year of maintenance costs
$1,371 Monthly payments are based on the average interest rates for new and used cars as of Q1 2022 and a 60 month period. Repair and maintenance expenses in your first year as a new owner are based on to Edmunds. Price shouldn’t be the only aspect you consider when selecting an automobile. You must also consider factors like depreciation security features, reliability, and your preferences. When buying a brand new car. A brand-new car is a lower-maintenance investment that is based on the most recent technology. Benefits of purchasing a new car comes with a range of features that you are able to choose when you locate the right dealer. Customization: One of the main benefits of purchasing a brand new car is that you can have it customized to suit your needs You can pick the color and style that you want and request any add-ons that appeal to you. Current technology is a practical benefit also — you’ll be driving away with the most recent technologies and safety features. Better interest rates: With a new car purchase it is more likely to secure a better interest rate for an auto loan than you would with buying a used car, often by a few percentage points. Reliability: You won’t have to deal with any hidden mechanical problems in the event that you purchase a new. Additionally, it will reduce the amount you spend on repairs and maintenance during the initial year of your ownership. Cons of buying new Unfortunately, buying new is more expensive and comes with a few disadvantages that could eat away at your budget. Costlier: New cars are often many thousands of dollars higher than older counterparts, which can cause a down payment or monthly loan payments more difficult to manage. Also, you’ll have depreciation to consider the rate at which your car loses value. The saying goes that new cars lose value as soon as you drive them off the lot. New vehicles lose 20% of their value within the first year. depreciation continues for at least 10 years following the purchase. Higher insurance costs new cars typically cost more to insure due to their higher chance of theft, their higher value , and other aspects. If you decide that is the right option for you, make a make sure you plan your budget and be aware of . Making the right decision about when to buy your car and could help reduce initial costs. Considerations when buying used Used cars typically come with a lower price tag and depreciate more slowly but have other shortcomings to be aware of. Advantages of buying used a pre-owned vehicle, you can save money on your monthly payments, insurance, and other charges. Furthermore, depreciation may occur at a slower pace. Have a look at these key benefits below: Less expensive The primary benefit is the fact that they tend to be more affordable than their brand new counterparts. Getting the same model you’re looking for a few years old can save you some thousand dollars. Reduced insurance costs and fees A lot of pre-owned cars have lower fees for titling and sales tax. You could save money both on the lot and over the car’s life. A slower depreciation rate: Older cars also depreciate much more slowly. Rather than losing 20% of its value within the first year of ownership, a three-year-old car would likely just lose 10 percent. A negative experience with buying used might 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 need to look for the style, color and you’re looking for. In the end you could need to compromise. The market for cars is highly competitive at the moment, and you may not be able to check every box. Car history: You will be required to verify the maintenance history of your vehicle to make sure it was owned by the original owner who was responsible for the vehicle. It is recommended to take the car to a trusted mechanic for a checkup — including a brake check and engine test — prior to closing any deal. You can expect to pay around $100 for the services of a mechanic however it’s worth the cost. More expensive maintenance costs: Even if the car is in good shape an older car will require more repairs and maintenance in the future. This could eat into the savings you make from the initial purchase, so consider your long-term budget when deciding between new versus used. If you’re looking to save money on your initial purchase, a pre-owned car is an excellent option. However, you must be aware of the expenses over the life of ownership that includes repairs and maintenance. Certified pre-owned options If you’re leaning toward purchasing used, but aren’t sure about relying on the car’s past it’s a great choice. A certified pre-owned vehicle is one which has passed a rigorous inspection by either the dealer or the manufacturer. These vehicles are considered to be an intermediate between new and used vehicles in terms of price upfront as you’ll be charged to have the vehicle inspected. This additional certification is perfect for those who need the security of a car that is in good condition, but without the price tag of a brand new vehicle. Which is the best way to decide whether to purchase a brand-new or used vehicle The decision between buying a brand new or used vehicle will come down to a variety of factors, including financial considerations and your tastes and requirements. Take into consideration these factors when deciding which type of purchase is right for you. Budget multiple costs are usually less expensive when you purchase an older vehicle instead of a new one. Everything from dealer fees is less expensive when you purchase an older vehicle. Based on the car you pick the price of purchase will also typically be less for a used car. When you calculate the numbers to figure out how much you can afford for a car, look beyond the monthly payment and insurance. Include annual registration costs, fuel expenses, maintenance and repairs. Bells and whistles One of the benefits of buying an all-new car is that it will include modern technology as well as safety equipment. What’s more, if being in a position to choose a specific colour or design of the interior is important to you, then a new car purchase will simplify this. If you are buying a used vehicle you might have to do a lot of searching to get exactly what you want. But, the benefits of choosing the right package for tires and sound system, or even seating might not be worth the cost savings by avoiding these add-ons and buying second-hand. And if you have concerns about the safety of the vehicle you’re considering using the tools on the website to determine the safety rating. Maintenance needs A slightly older may have higher maintenance expenses, which is important to consider if you’re on a tight budget for household expenses. A large portion of the maintenance that comes with a brand-new car will likely be under warranty. However, if you’re considering a used car that’s no longer covered under warranty, it’s not necessarily a deal breaker. It’s possible to get the protection you want. The average extended warranty costs roughly $1,480, but you can pay more or less, depending on your vehicle and the amount of protection you choose. How to find the best price on your vehicle, whether you choose to purchase a brand new or used, you must remember that conducting a thorough research on the car is the most important factor in . Research should include checking the car’s safety history, insurance costs and five-year cost-to-own. Try to help make an informed choice. It is also advisable to take the time to test-drive multiple vehicles and shop around with a couple of sellers, getting quotes from several . Make sure you are getting the lowest monthly payment and most competitive financing terms to ensure that you keep more of your hard-earned dollars in your pockets. The final decision between new and used is a matter of balancing to a variety of factors, such as the concerns you have regarding depreciation, your budget, your decision to purchase certain features and how long you’re hoping to own your vehicle. When you’ve got a car in your mind, research and before you head to the dealer, make sure you get the most affordable price. Learn more
Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ways and pitfalls of borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to manage their finances with precise, well-researched and clear information that breaks down complicated subjects into bite-sized pieces.
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