New vs. Used Cars

Used cars are cheaper to purchase but tend to have high maintenance costs, while new cars are less likely to need repairs due to mechanical breakdowns but are expensive to buy. You’re also more likely to get a warranty and a low interest rate when you buy a new car. That said, more than twice as many used cars are sold in the U.S. each year.

Advantages of Buying a New Car vs. a Used Car

New and used cars both have their own advantages. For example, new cars tend to have the latest safety features and require less maintenance for wear and tear, while old cars are cheaper to buy and depreciate more slowly.

However, when it comes to what consumers are actually purchasing, used cars typically account for around three-quarters of car sales every year. The table below breaks down how many new and used cars have been sold over the past 10 years.

Used Car Sales vs. New Car Sales

*Source: Statista, Bureau of Transportation Statistics & Edmunds

*Note: New car sales include both sales and leases.

Just because the table above shows that used cars are more frequently purchased than new cars, it doesn’t mean pre-owned is the right option for you. We’ll detail below how to determine whether you should get a new or used car.

Should You Buy a New Car or a Used Car?

You should buy a new car if you don’t want to worry about your car breaking down unexpectedly and if you have more room in your budget to afford the purchase price. If you have a tighter car budget and you are willing to do necessary repairs, a used car may be better for you.

It’s important to look at a variety of different factors, such as your budget, the cost of insurance and safety features, when deciding whether to buy a new or used car. The table below details which type of car wins in each major category.

New vs. Used Car Comparison

Your decision on whether to buy a new or used car comes down to which factors you choose to prioritize. You can find more details about the key factors to consider below.

Upfront costs

New cars have a higher price tag than used cars. A new car costs about $48,000 on average, according to Kelley Blue Book, while the average price for a used car is a little more than $25,000. Since new cars have a higher purchase price, you will also tend to pay more for sales tax than used cars.

Insurance costs

The high purchase price and the complex technology included in new cars make them expensive to repair and replace. Since new cars have high repair and replacement costs, insurers tend to charge drivers with new cars more than drivers with used cars. Every year a car ages, the cost of car insurance drops by around 3.4%, according to reports.

Maintenance

Since used cars are older when you buy them, they will obviously come with more wear and tear than new cars. This makes used cars more likely to break down and require frequent repairs. New cars are less likely to require maintenance due to breaking down, and if they do, the cost of these repairs is usually covered by the manufacturer’s warranty at no additional cost.

Safety features

Used cars may only come with standard safety features, such as air bags and seatbelts, which are included with every vehicle. New cars, on the other hand, have the latest technology that can keep you safe on the road. For example, many cars have driver assistance features that can alert you to obstacles on the road or automatically brake your vehicle to avoid a collision.

Depreciation

New cars lose around 20% of their initial value within the first year and 60% within five years. If you buy a new car and sell it a year later, you may only be able to recoup 80% of the original price you paid, for example. By the time you buy a used car, most of the depreciation may have already occurred.

Warranty

New cars typically come with a manufacturer's warranty, which covers manufacturer defects and damage due to wear and tear. Warranties for new cars come at no additional cost and can last for up to 10 years, but most last for three years or 36,000 miles, whichever comes first.

Used cars have limited options since they may have already surpassed the limit for the original manufacturer’s warranty. Used car owners can instead get a third-party extended warranty, which can come with high costs and some exclusions.

Interest rates

Used cars tend to have higher interest rates than new cars since lenders have a harder time determining the true value of a used car. While new cars are typically in good condition when purchased, the condition of a used car is less likely to be known since information may be missing from the car’s history, and potential mechanical issues can make the car loan more risky for lenders. Lenders make the risky auto loan investment worthwhile on a used car by increasing the interest rate.

Approval odds

Lenders are more likely to approve loans for new cars than used cars since new cars are assumed to be in good condition when purchased and lenders can more easily determine the value of the car.

Budget

If your budget is tight, a cheaper used car may not overextend your budget as much as an expensive new car. Make sure to factor things like car insurance, registration fees, maintenance costs, and gas into your budget since these can add to the overall cost of a car.

Ask the Experts

To help drivers determine whether a new or used car is right for them, WalletHub asked a panel of experts for their opinion on the topic. Click on the links below to find their commentary and advice.

1. In general, is it better to buy new or used cars?
2. What are the advantages of buying a new car?
3. What are the advantages of buying a used car?
4. How do you determine whether to buy a new or used car?