The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
The Great Car Debate: New or Used?
For many of us, a vehicle is more than just the thing that gets you from point A to point B. Your car can be a family transporter, a convenience maker, a friend carrier or a freedom-giver (yay, road trip!). That’s why trading in your ride or buying a new one is such a big decision.
One of the most important questions you’ll ask is, “Is it better to buy a new or used car?” A record number of over 39 million used vehicles were sold in 20201 — over twice the number of new car sales that year! So, should you jump on the used car bandwagon and save some cash? Not so fast.
Click on the cars to find out the monthly and yearly costs of each type.
(Note that these costs are estimates and approximates.)
A Brand-New Ride
Enjoy updated tech, warranty coverage and more in a current vehicle.
Average New Car Purchase Price
$37,8762 (Kelley Blue Book Feb 2020)
Repairs & Maintenance
8.94 cents per mile average x 15,000 miles = $1,341/year3
(Keep in mind some or all of this cost may be covered under warranty.)
- Depreciation basically means that your car loses value as you drive it.
- The average vehicle decreases in value by $3,334 per year.3
- Some experts estimate that owners lose an average of $15,000 in the first five years of owning a car due to depreciation.
11.6 cents per mile average x 15,000 miles = $1,740/year 3
Licensing, Registration & Taxes
An average of $7533
Total Average Cost of a New Car: $773.50 per month3
This number includes loan interest and insurance, as well as the other expenses we outlined. It does NOT include the principal costs of a car loan.
SOME OTHER PROS OF A NEW CAR:
- Maintenance and repairs are fully or partially covered by warranty
- Latest technology and gadgets
- Lower interest rates
- No reports or receipts needed
A Pre-Owned Vehicle
Average Used Car Listing Price
Let’s imagine you buy a pre-owned 2015 Toyota Camry and look at what you might expect to pay as of summer 2021.
Carfax (or other vehicle history report)
Many dealerships offer a free vehicle report with pre-owned car sales; however, you can also purchase your own inexpensively if you are buying through a private seller. While there are reports available for as little as $10 (or even free depending on circumstances!), CARFAX reports are among the most detailed, providing info on previous owners, accidents, repairs and maintenance.
Repairs & Maintenance
$7,6255 total for a pre-owned 2015 Toyota Camry as of summer 2021, based on a five-year estimate with 15,000 miles driven per year.
$10,0125 total for a pre-owned 2015 Toyota Camry as of summer 2021, based on a five-year estimate with 15,000 miles driven per year.
$7,4565 total for a pre-owned 2015 Toyota Camry as of summer 2021, based on a five-year estimate with 15,000 miles driven per year.
Taxes & Fees
$2,3195 total for a pre-owned 2015 Toyota Camry as of summer 2021, based on a five-year estimate with 15,000 miles driven per year.
Total Cost of Ownership:
$35,6085 total for a pre-owned 2015 Toyota Camry as of summer 2021, based on a five-year estimate with 15,000 miles driven per year.
This number includes financing and insurance costs, as well as the other expenses we outlined.
SOME OTHER PROS OF A USED CAR:
- Lower purchase price
- Lower Arizona registration fees
- Insurance costs may be lower
- Reduced depreciation
If you’re still wondering "Is it better to buy a new or used car?” There’s no wrong answer. Whether you choose to buy straight from the auto factory or give a pre-owned vehicle some more love, there are pros and cons that go beyond just purchase price. There are subjective peace-of-mind costs, like worrying about haggling with a dealership or the potential safety issues of buying through a private party.
With a new vehicle, you typically pay more fees upfront but have significantly reduced maintenance and repair costs while the car is under warranty. Unfortunately, you’ll also have to kiss your big resale value goodbye as soon as your drive it off the lot. A used car or truck, on the other hand, may break down more often but will hold its value better. You may also have a better chance of paying for it in cash, thus avoiding any finance costs.
In the end, you should choose what works best with your current budget and lifestyle. Consider what’s most important to you! Do you want the latest gadgets? Do you want to get more of your purchase costs back when you sell it later? By answering these types of questions and looking at the basics we’ve covered here, you’ll be able to make a more informed decision. Now go and enjoy the best part of buying a vehicle — driving away in your sweet new ride!