The car shopping market is presenting drivers with the same classic dilemma: should you buy new or used? But, there are modern-day considerations as several factors and current events shape this debate, including depreciation trends, interest rates and price shifts in both new and used car markets. Making the right choice requires a close look at your financial situation and ownership goals.
Our friends Zach & Ray Shefska, Co-Founders of CarEdge, offer an easy-to-understand breakdown to help consumers make this all-important decision that will impact them for years to come.
When to Buy New:
- You plan to keep the car for 5+ years and want the latest features.
- You qualify for low APR financing and want predictable monthly payments.
- Manufacturer incentives significantly reduce the cost.
- To avoid depreciation altogether, consider leasing a new car.
When to Buy Used:
- You want to avoid rapid depreciation and pay less upfront.
- You’re willing to shop for 3-5 year-old vehicles in good condition.
- You don’t mind driving a car with fewer bells and whistles.
- You’re prepared to negotiate a great used car deal.
Here are details on some of the key considerations to help you determine whether buying new, buying used, or leasing makes the most sense for you.
Financing Deals Versus Depreciation Risks
New cars are known for their steep depreciation. A new car can lose 20-30% of its value within the first two to three years of ownership. However, buying new has its advantages, too. Manufacturer incentives are sweetening the deal for buyers with attractive lease offers, low APR financing, and cash incentives that simply aren’t available for used car buyers.
Why Buy New?
- Incentives Galore: Automakers are offering competitive promotions to attract buyers, including 0% APR financing and cash-back deals.
- Peace of Mind: New cars come with full warranties, the latest safety features, and no concerns about wear and tear from previous owners.
- Custom Orders: Buying new allows you to select the exact trim, color, and features you want. However, custom orders can come at an even higher price.
Drawbacks of Buying New:
- Higher Initial Cost: Even with incentives, new cars come with higher upfront prices compared to used options.
- Depreciation Risk: If you plan to sell your car in less than five years, you’ll likely face a significant financial loss due to depreciation.
- If you’re considering a new car but worry about depreciation, leasing may be a better option for you. It allows you to enjoy the benefits of driving new without the financial impact of resale value losses.
Interest Rates Matter – New Cars Have Lower Rates
Interest rates are a defining factor in the new versus used car debate. While borrowing costs remain high, automakers make it easier to finance new cars by offering low APR financing. Used car loans, on the other hand, often come with higher interest rates from banks and credit unions.
Why New Cars Win on Interest Rates:
- Lower APR Offers: Many manufacturers are advertising rates as low as 0% APR for new car buyers, helping you save thousands over the life of the loan.
- Better Loan Terms: Lenders tend to offer more favorable terms for new cars compared to used, including longer loan periods and lower down payment requirements.
Used car loans typically come with interest rates about 5% higher than those for new vehicles. Over a five-year loan term, this can significantly increase the total cost of financing a used car. If monthly payments are a concern, financing a new car with low APR may actually make more financial sense.
However, NEVER negotiate monthly payments – always negotiate the Out-the-Door Price to avoid add-ons and ripoffs.
New Tools Make Negotiating Easier Than Ever
The days of guessing what to pay for a new car are over. Today, buyers have access to tools that provide insight into dealer pricing, invoice costs, and manufacturer incentives.
How to Save Big When Buying New:
- Use Dealer Invoice Pricing: This allows you to see what the dealer pays for the car and giving you leverage in negotiations.
- Keep Up With Local Market Trends: Today, any car buyer in America can see the ins and outs of their local car market for each make and model..
- Compare Offers Across Dealers: With free online tools, you can easily master the art of negotiating. A big part of this is learning how to effectively cross-shop between dealerships. Always compare prices and incentives from multiple dealerships to ensure you’re getting the best deal.
- Leverage Manufacturer Incentives: Research available incentives to maximize your savings before heading to the dealership. We gather the best incentives in one spot for you.
These tools make it easier than ever to negotiate confidently and secure the best deal on a new car. That said, deals can still be hard to come by without the right negotiating tools.
Why Consider Buying Used?
- Lower Upfront Costs: Used cars are more affordable than their new counterparts, making them a better choice for budget-conscious buyers. Saving $100 or more on monthly payments over five to six years really adds up!
- Avoid Steep Depreciation: Buying a 3-5 year-old used car allows you to avoid the steepest depreciation period, saving you thousands. If you decide to sell in a few years, you won’t feel the heavy depreciation that a new car buyer in a similar situation would experience.
- Used Cars Are Negotiable: As competitive new car incentives remain, fewer car shoppers are heading to the used car lots. A slump in demand is good news for those willing to negotiate used car prices.
Challenges of Buying Used:
- Higher Interest Rates: As mentioned earlier, used car loans often come with higher APRs, which can offset some of the savings. The average used car loan rate in North America is nearly 14% APR.
- Limited Incentives: Unlike new cars, used vehicles don’t come with manufacturer promotions or warranties. However, you can get a fair deal on an extended warranty.
- Condition Concerns: Always get a pre-purchase inspection to avoid surprises with hidden issues.
- Despite these challenges, buying used is still the go-to option for many drivers who prioritize affordability and don’t mind sacrificing the latest features.
For many car buyers, a 3-5 year-old used car strikes the perfect balance between affordability, reliability, and long-term value. This “sweet spot” in the used car market offers significant benefits that make it a smart choice for budget-conscious drivers who don’t want to sacrifice quality or performance.
Here’s why a 3-5 year-old used car could be the ideal option for you:
- Avoid Steep Depreciation – New cars typically lose 30-40% of their value within the first three years, making depreciation one of the biggest hidden costs of buying new.
- Lower Upfront Costs – Compared to buying new, 3-5 year-old used cars are significantly more affordable.
- Modern Features Without the Premium – A car that’s 3-5 years old still comes equipped with many of the features found in today’s new models, such as advanced safety systems and driver assistance.
- Remaining Warranty Coverage (Depending on Mileage) – A 3-5 year-old car is typically well within its prime and often covered by a portion of the manufacturer’s original powertrain warranty. If coverage is about to run out, get an Extended Warranty quote for peace of mind.
- Better Financing Options Compared to Older Cars – While interest rates for used car loans are higher than those for new cars, lenders generally offer better rates for late-model used cars compared to older vehicles. This makes financing a 3-5 year-old car more manageable and less risky.
How to get the best of ‘both worlds’
By choosing a 3-5 year-old used car, you get the best of both worlds: modern features at a lower price, and the ability to avoid the financial pitfalls of buying new. It’s a smart compromise for car buyers looking for value and reliability. To ensure you’re making a wise investment, always research market trends, request vehicle history reports, and schedule a pre-purchase inspection before buying any used car.
Founded in 2019 by father-and-son team Ray and Zach Shefska, CarEdge is a leading platform dedicated to empowering car shoppers with free expert advice, in-depth market insights, and tools to navigate every step of the car-buying journey.









































































































