A new car has a warranty and the latest features but depreciates fast, while a used car costs less and loses value more slowly. The best choice depends on budget and reliability.
New car
- Warranty, typically 3 years/36,000 miles bumper to bumper and 5 years/60,000 miles powertrain.
- Latest safety tech and financing deals.
- Depreciation: about 20% in the first year and about 60% by year 5.
Used car
- Lower price and slower depreciation.
- Possibly higher repair and maintenance costs.
- Certified pre-owned (CPO) cars add warranty coverage.
Which is better
A 2 to 3 year old used car often gives the best value.
Tips
Get a vehicle history report and a pre-purchase inspection.
Depreciation
A new car loses value fastest in the early years. Industry analyses such as those from Edmunds and Carfax estimate a loss of about 20% in the first year and around 40% to 50% within five years. A 3 year old used car has already absorbed the steepest part.
Price gap
In recent years, average new car prices in the US have been around 48,000 dollars, while the average used car costs around 26,000 to 28,000 dollars, according to Kelley Blue Book and Cox Automotive data.
Insurance and fees
New cars often cost more to insure, with higher registration fees and sales tax in many states. Used cars may be cheaper in each of these.
Reliability and warranty
New cars come with a factory warranty, often 3 years or 36,000 miles bumper to bumper and 5 years or 60,000 miles for powertrain. Certified pre-owned (CPO) cars generally have extended warranties and inspection, at a price premium of about 1,000 to 2,500 dollars.
Financing
Interest rates are usually lower for new cars. In late 2023, average rates for new car loans were around 7% versus 11% for used cars, but they depend on credit.
Technology and safety
New models offer the latest safety features such as automatic emergency braking, which is now standard on most 2023 and later models.
Checking a used car
- Get a vehicle history report (Carfax or AutoCheck).
- Have an independent mechanic inspect it.
- Test drive and check for recalls using the VIN at NHTSA.gov.
- Check for rust, leaks and odd noises.
Total cost
Compare total cost of ownership over several years, including depreciation, fuel, insurance, maintenance, taxes and financing.
Rule of thumb
Keep the total monthly car cost under 15% of take home pay.
Depreciation and price data
A new car typically loses about 20 percent of its value in the first year and a total of roughly 45 to 60 percent within five years, according to industry analyses. Kelley Blue Book reported the average new vehicle transaction price was about 48,000 USD in 2024, while average used vehicle prices were roughly 25,000 USD, according to Cox Automotive. Used cars usually have lower insurance and registration fees. New cars bring the latest safety features, a full warranty and often lower financing rates, and certified pre-owned cars offer an inspection and extended warranty at a middle price.
Checking a used car
Get a vehicle history report (such as Carfax or AutoCheck), search the VIN for open recalls on NHTSA’s website, and pay an independent mechanic for a pre-purchase inspection, which usually costs 100 to 200 USD. Test drive on different roads and look for rust, uneven tire wear and warning lights. Compare the total cost of ownership, including fuel, maintenance and insurance, not only the sticker price. Reliability varies by model, so check ratings from Consumer Reports. Negotiate using market prices from sites like Kelley Blue Book or Edmunds.
Based on data from Kelley Blue Book, Cox Automotive and NHTSA
