Should I Buy a New or Used Car? – NewsRoomUS

In the event you’re buying round for some new wheels, it’s simple to get swept off your toes by all the flowery bells and whistles inside the latest vehicles to hit the market.

In any case, a number of the newest fashions include all these cool new options like heated steering wheels and massaging seats. That’s proper, the seats provide you with a therapeutic massage. What a time to be alive. It’s virtually sufficient to make you overlook concerning the 1–2-year-old used vehicles which might be additionally sitting within the dealership lot. As a result of these are so final 12 months.

However is new actually higher? What are the professionals and cons?

New vs. Used Automobiles: Which Are Higher?

We’re not going to beat across the bush: The easiest approach to purchase a automobile is to avoid wasting up and buy a reliable, slightly used car (with money). You’re all the time going to be higher off shopping for used and paying up entrance as an alternative of going for the shiny new mannequin that some overcaffeinated automobile salesman is making an attempt to get you to borrow cash for.

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The selection between a brand new or used car (and the way you pay for it) could possibly be the distinction between driving the freeway to wealth and monetary independence or spinning your wheels in a rut of debt and endless payments.

But when that new automobile odor has given you a critical case of automobile fever, the one prescription is chilly, onerous numbers. So let’s get proper right down to it!


“Purchase a brand new automobile,” they mentioned. “You received’t have to fret about repairs or upkeep,” they mentioned.

First, security is all the time a priority. And one of the crucial frequent arguments towards shopping for a used automobile is that it’ll put on out sooner and received’t be as dependable as the brand new ones rolling straight off the meeting line.

The reality is that regardless of all of the claims from your mates and neighbors on the contrary, you’ll find like-new used vehicles which might be simply as secure and reliable as a brand new automobile—and at a less expensive worth.

You could find like-new  used vehicles which might be simply as secure and reliable as a brand new automobile—and at a less expensive worth.

The truth is, some newer vehicles (particularly fashions of their first 12 months of manufacturing) are among the many ­least dependable vehicles you may drive.1 From defective air conditioners to troublesome transmissions, many drivers of newer mannequin vehicles find yourself making fixed journeys to the mechanic or getting manufacture recall notices within the mail.2

So simply bear in mind once you’re automobile buying that new doesn’t mechanically equal secure. All of it relies on the kind of automobile you’re taking a look at and the way lengthy the automobile has been on the street.


Now for the maths. Whether or not you could have a automobile, a ship or a lawnmower, all of them go down in worth over time as they undergo the damage and tear of on a regular basis use. That loss in worth is known as “depreciation,” and it’s a reality of life.

However right here’s the kicker on the subject of automobile depreciation: New vehicles lose their worth at a a lot quicker charge than used vehicles do. Relying on the make and mannequin, some vehicles would possibly maintain their worth a bit higher than others. However all of them lose their worth over time—particularly new ones.

Simply how briskly do new vehicles lose their worth? Buckle up. It’s going to be a bumpy trip! Right here’s a take a look at how rapidly a brand new automobile loses its worth:

  • After One Minute: In the event you purchase a shiny new $35,000 automobile, it loses someplace between 9–11% of its worth the second you drive off the lot. You’re principally throwing $3,500 out the automobile window as you drive the automobile residence for the primary time!

  • After One Yr: Quick-forward 12 months and that automobile sitting in your driveway can have misplaced round 20% or perhaps much more of its worth from the day to procure it.

  • After 5 Years: You may count on your new automobile to lose 60% of its worth after driving it round for 5 years.3 Most vehicles lose about 10% of their worth yearly after that steep first-year dip.4   

Preliminary Automotive Worth $35,000
New Automotive Worth After . . .

1 minute


1 12 months


2 years


3 years


4 years


5 years


In the event you purchase a $35,000 shiny new automobile, that automobile loses someplace between September 11% of its worth the second you drive off the lot. Quick ahead 12 months and that automobile will lose round 20% of its worth from the day to procure it.

Give it some thought: In the event you simply wait just a few years, you possibly can let another person tackle the brunt of these first few years of depreciation and purchase a good-as-new automobile for half the value!

And don’t even take into consideration financing it with automobile funds. Issues with motors in them go down in worth, and it’s best to by no means borrow cash for something that goes down in worth. No exceptions!

The True Price of Shopping for New vs. Used

Let’s see how this performs out in actual life. Let’s say Jack and Tony are each trying to purchase new autos. Jack decides to avoid wasting up and purchase a dependable used automobile with money whereas Tony goes the “regular” route and funds a brand new truck.

The typical new automobile mortgage is $31,722 with a month-to-month fee of $545 over a median mortgage time period of 69 months.5That’s virtually six years of $545 automobile funds.

To place these numbers in perspective, let’s say Tony takes out a median automobile mortgage ($31,722) with a median month-to-month fee ($545) for the typical mortgage time period (69 months) and retains the truck all through the tip of the mortgage.

Like we talked about earlier, his new truck begins dropping worth the second he drives it off the lot and continues to lose an enormous chunk of its worth within the first few years. After 4 years, it’s value lower than half of what Tony purchased it for and continues to drop 10% every year after that.

That signifies that on the finish of the six-year mortgage, Tony paid $37,605 in automobile funds for a truck that was initially value lower than $32,000 and is now value about $10,000 (if he’s fortunate) on the finish of the mortgage time period.

In the meantime, Jack discovered a four-year-old sedan with low mileage and loads of life left within the tank for $12,000, and he paid for it with money. Meaning he owns the automobile free and clear. No funds!

So what may Jack do with an additional $545 every month that he’s not utilizing to repay the automobile?

In a single state of affairs, he may put all these financial savings towards upgrading his automobile down the street. If he saves $545 each month, he may purchase a $20,000 automobile in simply three years, whereas Tony continues to be simply midway by means of the mortgage on his truck.

Higher but, what if Jack swears off automobile funds and invests that $545 in solid-growth inventory mutual funds from age 30 to 70? Assuming a median annual charge of return, he may find yourself with greater than $5 million saved for retirement.

And what would occur if he splits that common month-to-month automobile fee evenly between saving for his subsequent automobile and retirement investing? Jack may preserve shopping for barely used vehicles for $12,000 each 4 years and nonetheless have $1.5 million saved for retirement by the point he hits age 65.

We hope Tony likes the truck!

Is It Ever Okay to Purchase a New Automotive?

As a normal rule of thumb, the entire worth of your autos (something with a motor in it) ought to by no means be greater than half of your annual family earnings. Dave doesn’t advocate shopping for a brand new automobile—ever—till your web value is greater than $1 million. In the event you’re a millionaire and also you need to purchase a brand new automobile that prices a very small share of your web value, then go for it.

Once we not too long ago requested everyday millionaires what sort of vehicles they drive, we discovered that the typical millionaire drives a four-year-old automobile with 41,000 miles on it. And eight out of 10 millionaire automobile patrons drive it away debt-free with no automobile fee.

The true downside with new vehicles is that the overwhelming majority of the individuals who purchase them (85%) both take out a mortgage or a lease to get one.6 And as we speak, thanks largely to our love affair with new vehicles, greater than 113 million Individuals have taken out auto loans and owe $1.27 trillion with a T in automobile debt. Solely mortgages and pupil loans account for extra of America’s whole debt stability.7

In consequence, most people who purchase a brand new automobile wind up feeling like their automobile owns them as an alternative of the opposite approach round.

Shopping for Used Will Save You Cash on Automotive Insurance coverage

We’ll shut with this one as a result of plenty of automobile patrons overlook to issue this into the equation after which endure the sticker shock from the steep insurance coverage premiums that include a brand new automobile.

Drivers of latest vehicles usually get caught with higher-than-average premiums. As a result of new vehicles are extra pricey to restore or exchange, additionally they value extra to insure. Even with a number of the newest security know-how, insurance coverage corporations not often supply reductions to new-car drivers for having these options.

Whereas new-car drivers will spend roughly $1,650 that 12 months on automobile insurance coverage premiums, you possibly can save 12% on insurance coverage premiums if you happen to purchase a five-year-old model of the identical automobile.8

In the event you’re buying a car and are prepared to economize on automobile insurance coverage, our Endorsed Native Supplier (ELP) insurance coverage brokers might help you discover one of the best offers on auto protection in your space.

Find an independent agent today!

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