Is it better to buy a new or used car financially?

Used cars cost less upfront but can be more expensive to maintain and repair, while new cars depreciate quickly but are covered by warranties. However, the right choice depends on your unique circumstances.

What are the best years to buy a used car?

Resources like Edmunds, Car and Driver, CoPilot for CarShopping and KBB offer comprehensive analyses of the best and worst years for specific makes and models, but most new cars shed most of their original value in the first five years through depreciation.

Does a new car lose value faster than a used car?

Yes. The average new car forfeits 60% of its value in the first five years before depreciation tapers off.

Are certified pre-owned cars worth it?

Certified pre-owned cars offer a compromise between new and used vehicles. They cost more than standard, as-is used cars, but they come with comprehensive, multi-point inspections, extended warranties and greater guarantees.

How do I know if I’m getting a good deal on a used car?

Use a checklist like the one provided in this guide to protect yourself from fraud, hidden flaws and surprise expenses, and compare the asking price to the KBB fair market value for that specific make and model in a similar condition.

What’s the biggest advantage of buying a new car?

Brand new cars are under warranty, have the latest safety and tech features and suffer from zero wear and tear on the body, in the interior and on the mechanical components.

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Buying New vs Used Car: Which Option Makes More Financial Sense?

May 2, 2025

6 min Read

Written by Andrew Lisa

Edited by Emily Gadd

Young, handsome man just bought his first car.

urbazon / Getty Images

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Buying a new car makes more financial sense than buying used — but only if your finances, lifestyle, intentions, driving habits and the vehicle itself justify the added cost and align with the many other variables that influence the decision.

This guide will walk you through the many considerations of buying new vs. used, including depreciation, ownership experience, maintenance, safety, long-term costs, insurance and financing.

Buying New vs. Used: Side-by-Side Comparison

Feature	New Car	Used Car
Price	Higher	Lower
Warranty	Full factory coverage	Limited or expired
Depreciation	Fastest in first 1-2 years	Already depreciated
Maintenance	Minimal early on	Can be more frequent
Financing Rates	Lower (typically)	Higher (especially for older vehicles)
Features/Tech	Latest available	May lack modern upgrades

How to Decide Based on Your Situation

Your circumstances will determine whether it makes more sense to buy new or used.

Buy New If:

You want peace of mind and the latest features
You plan to keep the car for seven years or more
You qualify for low-interest financing

Buy Used If:

You want to save upfront and avoid steep depreciation
You’re buying your first car or on a budget
You’re open to certified pre-owned options for added reliability

Pros and Cons of Buying a New Car

Consider the drawbacks and benefits of buying new before you decide.

Pros:

Comes with full warranty coverage
Latest features, tech and safety upgrades
Customizable options and packages
Easier to finance at lower interest rates

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Cons:

Higher upfront cost
Rapid depreciation (20-30% in the first year)
Higher insurance premiums

Pros and Cons of Buying a Used Car

Many drivers will find that a used car is the best bet, but only after weighing the potential upsides and limitations.

Pros:

Lower purchase price
Slower depreciation
Lower insurance and registration fees
Certified pre-owned (CPO) programs offer added reliability

Cons:

Limited or no warranty coverage
Unknown vehicle history
Higher maintenance and repair costs
Fewer customization options

Buying Used? Don’t Sign Until You’ve Checked Every Box on This List

Here’s a checklist of things to ask for and insist on when purchasing a used car.

Vehicle history report from a company like Carfax or AutoCheck
Maintenance records
Remaining manufacturer or third-party warranties
Pre-purchase inspection
Clear title and ownership
Reason for selling
Accident history
Mileage
Vehicle age
Number of previous owners
Kelley Blue Book (KBB) fair market value
Return and refund policy
Test drive

Long-Term Cost Comparison

According to Edmunds, the total cost of ownership or true cost to own (TCO) is a vehicle’s upfront purchase price plus the many expenses of owning and operating it over time.

Purchase Price	The most recent KBB data shows that the average new car sells for $47,462 compared to $25,180 for the average used car. For buyers whose chief concern is upfront cost, their budget often makes the choice between new and used on their behalf.
Depreciation	According to KBB, the average new car sheds 20% of its value in the first year and all but 40% in the first five years. After that, depreciation tends to slow, so used cars typically retain more of their value.
Value Retention and Resale	Unlike wear and tear, depreciation doesn’t matter while you own a car, but becomes the primary concern when you try to sell it or trade it in. The typical 60% five-year depreciation schedule gives new car buyers only $16,000 for a car they purchased for $40,000 just five years earlier.
Interest Rates and Monthly Payments	Data from Cox Automotive, KBB’s parent company, shows the average interest rate for a new car loan is 8.64% compared to 13.4% for used cars. Consider that you’d pay $4,471 in interest to finance a $30,000 new vehicle for 48 months, but you’d spend $5,945 in interest to finance a used car worth $10,000 less for the same period.
Maintenance and Repairs	Vehicles become more expensive to maintain as they age and repairs become more frequent and severe. According to myFICO, the average new car costs $30 per month to maintain vs. $60 for used cars.
Insurance	Research from insurance comparison platform The Zebra compared current new and used rates from industry leaders Allstate, Farmers, GEICO, Liberty Mutual, Nationwide, Progressive, State Farm and USAA. The study revealed that the average monthly insurance premium for new cars is $141 compared to $123 for used cars.
Warranties and Extended Coverage	Warranties cover damage from regular wear and tear and the cost of replacing defective parts. They are not insurance polices and don’t cover accidents or misuse, but they can minimize the cost of many common repairs. The industry standard is three-year/36,000-mile bumper-to-bumper warranties and 5-year/60,000-mile powertrain warranties. Used cars can inherit manufacturer warranties, come with limited dealer warranties or be sold as-is with no protection. Some used car buyers purchase extended coverage, which KBB warns often doesn’t justify the expense despite the peace of mind they provide.

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Final Thoughts

Both new and used cars offer value depending on your goals, but considerations like long-term costs, lifestyle needs, financial flexibility, planned length of ownership and driving habits will vary from driver to driver.

Take time to research, use online auto calculators to crunch the numbers and compare possible outcomes before making a decision.

FAQ

Is it better to buy a new or used car financially?
- Used cars cost less upfront but can be more expensive to maintain and repair, while new cars depreciate quickly but are covered by warranties. However, the right choice depends on your unique circumstances.
What are the best years to buy a used car?
- Resources like Edmunds, Car and Driver, CoPilot for CarShopping and KBB offer comprehensive analyses of the best and worst years for specific makes and models, but most new cars shed most of their original value in the first five years through depreciation.
Does a new car lose value faster than a used car?
- Yes. The average new car forfeits 60% of its value in the first five years before depreciation tapers off.
Are certified pre-owned cars worth it?
- Certified pre-owned cars offer a compromise between new and used vehicles. They cost more than standard, as-is used cars, but they come with comprehensive, multi-point inspections, extended warranties and greater guarantees.
How do I know if I’m getting a good deal on a used car?
- Use a checklist like the one provided in this guide to protect yourself from fraud, hidden flaws and surprise expenses, and compare the asking price to the KBB fair market value for that specific make and model in a similar condition.
What’s the biggest advantage of buying a new car?
- Brand new cars are under warranty, have the latest safety and tech features and suffer from zero wear and tear on the body, in the interior and on the mechanical components.

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