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6 min read . Published on December 1, 2022.
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the details of borrowing money to buy cars. The article was 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 feel confident to control their finances through providing clear, well-researched facts that break down complex topics into manageable bites. The Bankrate guarantee
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You have money questions. Bankrate has the answers. Our experts have helped you understand your money for more than four decades. We are constantly striving to provide our readers with the professional advice and the tools required to be successful throughout their financial journey. Bankrate follows a strict policy, which means you can be confident 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 choices. Our content produced by our editorial staff is factual, objective and is not influenced from our advertising. We're open about how we are able to bring 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 placement of sponsored products or services, or when you click on certain links posted on our site. This compensation could impact how, where 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 loan products. Other factors, such as our own rules for our website and whether the product is offered in your area or at your personal credit score can also impact how and where products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit product or service. It's the decision millions of car owners 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 just price -- but it's an important element. Driving new costs $716 per month, whereas used averages at $526, according to Experian's for the fourth quarter of 2022. If you're trying to lower the cost of your initial purchase, a pre-owned car is a great option. But , you'll have to think about the cost over the life of ownership, which includes maintenance and repairs. You might find that purchasing new is the better choice for your finances. Key takeaway
A new purchase is a good choice if you want the latest features and cheaper initial maintenance costs. Buying used might fit better when you're willing to compromise some features to lower the initial purchase and insurance.
Compare the costs of new or. used vehicles There are options for scouting for your next purchase, new or used. You can find new cars at local dealerships or through search engines such as or Edmunds. Used cars can be found through dealerships, however, you can also locate them (which could be cheaper)through independent dealers, private-party sellers or superstores like , or . In general the case of used cars, they are less expensive than new cars. But both have increased dramatically in cost over the past few years. New car loans have increased from a monthly average of $554 in the year 2019 to $667 in 2022, which is an 18.5 percent difference. Used cars also saw a drastic jump from $391 to $515 which is a 27.4% difference. For the best way to prepare for the cost of owning a vehicle -whether it's new or used- and can give you an idea of costs for purchase and maintenance costs over five years. Here's a price breakdown of Edmunds for a brand new Honda Accord versus a used one. New 2022 Honda Accord EX-L
Used in 2017 Honda Accord EX-L
Typical listing price
$35,338
$22,895
Estimated monthly payment
$668
$449
Estimated cost of the first year of maintenance costs
$140
1 371 monthly installments are built on average interest rates for both new and used vehicles in Q1 2022 and a 60-month period. Maintenance and repair costs for your first year as a new owner is according to Edmunds. The price shouldn't be the only factor you think about when choosing a car. You should also weigh vehicle depreciation security features, reliability, and your preferences. Considerations when buying a new car. Buying a brand new vehicle is a less-maintenance investment in the newest technology. The advantages of buying a new car comes with a wide range of features including many that you are able to choose if you can find the perfect dealership. Customization: The primary benefit of buying a new vehicle is the possibility of having it outfitted to your preferences and preferences. You can choose the color and style that you want and request any add-ons that you like. Modern technology is a practical benefit as well. You will get a car that is equipped with the latest technologies as well as safety equipment. More favorable interest rates: When you make a new car purchase, you are also more likely to get an interest rate that is better when you take out an auto loan than with an used vehicle purchase, often by a few percentage points. The reliability: You won't need to worry about any issues with your mechanical system when purchasing a brand new. In addition, you can limit the amount you spend on repairs and maintenance in the initial years of ownership. The disadvantages of buying a new car, buying new is more costly and has some downsides that can dent your wallet. Costlier The newer cars are usually hundreds of dollars higher than predecessors that are used, which can make a down payment or monthly loan payment more expensive to pay for. Depreciation: There's also the issue of to deal with the rate at which your car is worthless. The saying goes that new vehicles lose value when you drive them off the lot. That means that new cars lose 20 percent of their value within the first year of ownership, and depreciation is continued throughout at least 10 years following the purchase. Higher insurance costs new cars typically cost more to insure because of their higher chance of theft, greater price and other aspects. If you do decide that is the right option for you, you should think about and consider . Making the right decision about when to buy your car and could help reduce initial expenses. Things to consider when purchasing used cars typically come with the lowest price and depreciate more slowly but have other shortcomings to be aware of. Advantages of buying used an used car, you will reduce the cost of your monthly payments, insurance, and other fees. Additionally, depreciation is likely to be slower. Take a closer look at the following benefits: Less expensive: Used vehicles' primary advantage is that they're generally cheaper than new counterparts. Getting the same model you're interested in a couple of years old can save you some thousand dollars. Reduced insurance costs and fees A lot of pre-owned cars have lower , titling fees and sales tax. It can save you money on the purchase and over the course of the car's lifespan. A slower depreciation rate: Older cars also depreciate much slower. Instead of losing 20 percent of their value within its first few years of ownership the car that is three years old will likely only lose close to 10. The negatives of purchasing used could make you adjust your list of wants to make your next purchase and research the history of the car and put aside money to keep the car in good condition. Making compromises: You'll have to research to find the style, color and you're looking for. In the end, you may have to make compromises. The car market is extremely competitive and you might be unable to tick every checkbox. Car history: You'll also need to check the maintenance history of your vehicle to ensure it was owned by the original owner who was responsible for it. It is recommended to take the vehicle to a reputable mechanic for a checkup -- including a brake check and engine test prior to concluding any deal. It is possible to pay about $100 for the work of the mechanic, but it is well worth the cost. Costs for maintenance will increase even if your car is in good shape an older car will inevitably need more repairs and maintenance in the future. This could reduce the savings you earn from your first purchase, so be sure to consider your long-term budgeting when selecting new or used. If you're looking to reduce the cost of your first purchase, a used car is an excellent option. However, you must take into account the cost throughout the duration of ownership -- including maintenance and repairs. Certified pre-owned options If you're leaning toward purchasing used, but aren't sure about relying on the car's past then a certified pre-owned vehicle is an excellent option. A certified pre-owned vehicle is a used car that has undergone a complete inspection by either the dealer or the manufacturer. These vehicles are considered to be an intermediate between used and new vehicles in terms of price upfront since you'll pay extra in order to get the check. This certification adds value for those who need the safety of a vehicle that is in good condition, but without the price tag of a brand new vehicle. How to choose whether to buy a new or used vehicle The decision between buying a brand new or used car will come from a combination of the financial aspect and your preferences and requirements. Be aware of these aspects when choosing the type of vehicle that is right for you. Budget multiple costs are usually less expensive when you purchase a used vehicle rather than buying a brand new one. Everything from the to dealer charges are less costly when you buy a used vehicle. The vehicle you select the price of purchase will typically be lower for a used car. If you are calculating the numbers to figure out how much you can afford for a car consider more than the monthly payments and insurance. Make sure you include annual registration costs, fuel expenses maintenance and repairs. The bells and whistles one advantage of buying a new car is that it comes with modern technology as well as safety equipment. Furthermore, if you want to be capable of choosing a particular vehicle color or interior finishes is important to you, then a new car purchase will help you achieve this. If you are buying a used vehicle, you may have to spend a long time looking for precisely what you desire. But, the benefits of choosing the best package for tires, sound system or seating could not justify the cost-savings of skipping these accessories and instead purchasing used. If you are concerned about the safety of the vehicle you're considering you should use the tools available on the site to verify the safety rating. Maintenance needs A slightly older may have higher maintenance costs, which is an important consideration if you're on a tight budget for household expenses. The majority of the maintenance involved with a new car is likely to be covered under warranty. If you're thinking of an older car that is no longer covered under warranty, it's not a deal breaker. It's possible to get the extra protection you require. The typical extended warranty is approximately $1,480. However, you could spend far more or less, depending on your vehicle and the level of coverage you select. What can you do to get the best bargain on your car, regardless of whether you opt to buy a new or used, keep in mind that conducting a thorough research on the car is the most crucial element in . The research you conduct should include examining the safety rating of the vehicle as well as the insurance cost and five-year cost-to-own. Make sure to assist you in making an informed choice. Also, consider a test drive of multiple vehicles and shop around with a few dealers and get quotes from a variety of . Ensure that you get the lowest monthly cost and the most competitive financing terms to keep the most of your hard-earned cash in your pocket. The bottom line Deciding between new and used comes down to a variety of factors, such as the concern you have about depreciation, budget, determination to have specific features, and the length of time you plan on having your car. If you've got a vehicle in your mind, research prior to heading to the dealer, make sure you get the best price. 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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the details of taking out loans 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 control their finances through providing concise, well-studied information that breaks down otherwise complicated subjects into bite-sized pieces.
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