While the great feel and overall pleasure of driving a brand
new car is undeniable, it almost always makes more financial
sense to buy a used car.
New cars lose about 40% of their value within 3 years, at
which point the depreciation starts to slow down.
With used cars, the previous owner has absorbed the biggest
or steepest portion of the depreciation cycle. You buy at
the beginning of the low-cost part of the car ownership cycle,
and almost all of the costs of owning and operating a car
will be reduced. Some of the benefits of buying a used car
- Lower purchase price
- Lower depreciation
- No sales tax
- Lower financing costs (in the form of fees and interest
- Lower registration and license fees (which are usually
tied to the value of the car)
- Lower insurance premiums
Besides less excitement, buying a used car (or keeping your
current car) has a few downsides. The chances for expensive
unwarrantied repairs are higher, reliability can be reduced,
and major maintenance costs such as replacing the tires, battery,
brakes, and muffler may be on the horizon. New cars also tend
to have more safety equipment and better safety records.
To calculate the cost difference of new cars vs. used cars,
you can use our New
vs. Used Tool.