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6 minutes read. Published December 01, 2022
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely borrowing money to buy an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping their readers to control their finances through providing precise, well-researched, and well-written information that breaks down complicated topics into bite-sized pieces. The Bankrate promise
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If you have questions about money. Bankrate has the answers. Our experts have been helping you manage your money for more than four years. We are constantly striving to provide our readers with the professional advice and tools needed to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct standard of conduct, which means that you can trust that our content is honest and reliable. Our award-winning editors and reporters produce honest and reliable content to help you make the right financial choices. The content we create by our editorial staff is accurate, truthful and is not influenced by our advertisers. We’re open about how we are in a position to provide quality information, competitive rates and helpful tools to our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods andservices or through you clicking specific links that are posted on our site. This compensation could impact how, where and in what order items are displayed within the categories of listing, except where prohibited by law. We also offer mortgage, home equity and other home lending products. Other factors, such as our own website rules and whether a product is available in your region or within your self-selected credit score range could also affect how and where products appear on this site. We strive to offer a wide range offers, Bankrate does not include the details of every financial or credit product or service. It’s the choice that millions of car buyers make every year: Should you buy a brand-new ride or choose to purchase an older car for savings? Deciding between that new car smell or a used car is more than pricehowever, it’s a crucial factor. Driving new costs $716 per month while used vehicles average $526, according to Experian’s figures for the fourth quarter of 2022. If you’re looking to lower the cost of your initial purchase, a second-hand car is a great option. But you’ll need to consider the cost over the life of ownership, including repair and maintenance. It could be that buying new is the most cost-effective option for your budget. The most important thing to remember
New is often an excellent option if you require the most recent features as well as cheaper initial maintenance costs. A used purchase might be better in the event that you’re willing to compromise some features to lower the initial purchase and insurance.
Compare prices: New vs. used vehicles There are options for scouting for your next purchase, brand new or pre-owned. New cars can be found at local dealerships or by searching on sites such as or Edmunds. Used cars are offered at dealerships, however they are also available — potentially cheaper -through independent dealers, private-party sellers or superstores like , or . In general, used cars are cheaper than new cars. However, both have seen a dramatic increase in price over the last few years. New car payments have jumped from a monthly median of $554 in 2019 to $667 in 2022. That’s which is an 18.5 percent difference. Used cars also saw the most dramatic jump, from $391 to $515, a 27.4 percent variation. To best prepare for the expense of owning a vehicle -either used or new -and give you an idea of the cost of buying and five-year maintenance costs. Here’s the breakdown of prices from Edmunds for a brand new Honda Accord versus a used one. New 2022 Honda Accord EX-L
Pre-owned 2017 Honda Accord EX-L
Price of the typical listing
$35,338
$22,895
Estimated monthly payment
$668
$449
Estimated first year of ownership maintenance expenses
$140
The $1,371 monthly payments are calculated on the average interest rates for both new and used vehicles as of Q1 2022 and a 60 month period. Repair and maintenance expenses in during the initial year are according to Edmunds. Price shouldn’t be the only thing you consider when selecting a car. It is also important to consider depreciation, safety features, reliability and your personal preferences. Things to consider when purchasing a new car. A brand-new car will require less maintenance that is based on the most recent technology. Benefits of purchasing a new car comes with a variety of options that you get to pick when you find the right dealer. Customization: The main benefit of buying a new vehicle is the possibility of having it customized to suit your needs — you can select the color and style you want and request any add-ons that you like. Modern technology offers practical benefits also — you’ll get a car that is equipped with the latest technology and safety features. Higher interest rates: With the purchase of a brand new vehicle you’re more likely to receive an interest rate that is better for an auto loan than you would with a used car purchase, often by a few percentage points. Reliability: You don’t have to worry about any undiscovered mechanical issues in the event that you purchase a new. Plus, the should limit your expenditure on maintenance and repairs in the first few year of your ownership. The disadvantages of buying a new car, buying new is more expensive and has a few negatives that could cost you your budget. Costlier: New cars are often several thousands of dollars more expensive than used counterparts, which could cause a down payment or monthly loan payments harder to afford. Depreciation: There’s also the issue of to deal with the rate at which your car is worthless. As the saying goes, new cars are worthless the moment you drive them off the lot. That means that new cars lose 20 percent of their value in the first year. depreciation continues throughout at least 10 years following the purchase. Higher insurance costs new cars typically cost more to insure due to their higher chance of theft, greater value and other related aspects. If you do decide that is the right option for you, make a make sure you plan your budget and be aware of . Timing your car purchase carefully and could help reduce initial expenses. Considerations when buying used Used vehicles typically have the lowest price and appreciate more slowly, but have other shortcomings to be aware of. Pros of buying used With a pre-owned car, you could save money on the monthly installment, insurance and other charges. Additionally, depreciation is likely to occur at a slower pace. Consider these benefits below less expensive: Used vehicles’ primary advantage is that they tend to be less expensive than their new counterparts. If you find the exact model you’re interested in a couple of years old can save you some thousand dollars. Reduced insurance costs and fees: Many pre-owned cars carry less titling, registration and sales tax. You could save money both on the purchase and over the life of the vehicle. Slower depreciation: Used cars also depreciate much slower. Instead of losing 20% of its value within the initial year after purchase, a three-year-old car would likely only lose close to 10. The negatives of purchasing used could require you to adjust your priorities when you are ready to purchase your next car look up the car’s history and invest additional funds to keep the car in good condition. Making compromises: You’ll need to look for the color, style and design you’re looking for. Even then you could have to make some compromises. The market for cars is highly competitive right now, and you may not be able to check every box. Car history: You’ll also need to check the car’s maintenance records to confirm it was owned by the original owner who took good care of it. It’s advisable to bring the vehicle to a trusted mechanic for a routine checkupfor example, a brake test and engine test — before closing any deal. Expect to pay about $100 for the mechanic’s efforts however it’s worth the cost. Costs for maintenance will increase even if the vehicle is in decent condition the used vehicle will inevitably need more repairs and maintenance over the course of time. This can eat away at the savings you get from your initial purchase, so consider your long-term financial plan when choosing new versus used. If you are trying to save money on your initial purchase, a pre-owned car is an excellent option. But , you’ll have to be aware of the expenses over the life of ownership which includes maintenance and repairs. Certified pre-owned alternatives If you’re considering buying used but are hesitant about relying on the car’s past it’s an excellent option. A certified pre-owned vehicle is a pre-owned vehicle that has been subjected to a thorough examination by the dealer or the manufacturer. These cars are a middle ground between used and new vehicles in terms of cost upfront since you’ll pay extra for the inspection. This extra certification is ideal for a driver who wants the security of a car that is in good condition, but with the cost of a brand-new vehicle. Which is the best way to decide whether to buy a new or used car Deciding between a new or used car will come down to factors including the financial aspect and your preferences and needs. Take into consideration these factors when deciding which type of purchase is right for you. Budget Multiple costs are often lower when you buy a used vehicle rather than an entirely new model. Everything from the to dealer costs is less expensive when you buy a used vehicle. The vehicle you choose the price of purchase is usually lower for a used vehicle. When you crunch the numbers to determine how much car you can afford, look beyond the monthly payments and insurance. Be sure to include annual registration fees, fuel costs as well as repairs and maintenance. The bells and whistles one of the benefits of buying an all-new car is that it comes with the latest technology as well as safety equipment. Furthermore, if you want to be in a position to choose a specific vehicle color or interior finishes is important to you, then a new car purchase can simplify this. If you are buying a used vehicle it is possible to spend hours trying to find precisely what you desire. Still, the luxury of choosing the right tire package, sound system or seating could not justify the savings of avoiding these add-ons and buying used. If you’re concerned regarding the safety of the vehicle you’re considering you should use the tools available on the to check whether it has a safety score. Maintenance needs A slightly older may have higher maintenance expenses, which is important to consider if you have a limited household budget. Much of the maintenance associated with a brand new vehicle is likely to be covered under warranty. But if you’re leaning toward an old car that’s not longer covered under warranty, this isn’t necessarily a deal breaker. It’s possible to get the extra protection you require. The average extended warranty costs roughly $1,480, but you can pay higher or lower, depending on the type of vehicle you own and the coverage you select. How do you find the most affordable price on your vehicle, whether you decide to buy either used or new, keep in mind that research into the vehicle is the most vital element in . Research should include checking the model’s safety record, insurance costs and the five-year cost-to-own. Make sure to assist you in making the right choice. Also, make the effort to test drive multiple vehicles and shop around with a few dealers, getting quotes from several . Be sure to get the lowest monthly cost and most competitive financing terms to save more of your hard-earned dollars in your pockets. The bottom line Deciding between new and used comes down to many factors, including your concerns around depreciation, budget, your decision to purchase certain features and how long you’re hoping to own your car. Once you have a car in your mind, research prior to heading to the dealer for the best deal. Find out more
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ways and pitfalls of taking out loans to purchase 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 gain the confidence to manage their finances through providing clear, well-researched information that breaks down otherwise complicated topics into digestible pieces.
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