Is It Better to Buy a New or Used Car? - Advantages and Disadvantages of Buying New vs Used Car

Before choosing between a new or used car, it helps to understand the key costs and ownership factors that influence your decision. Think about:

• Budget and financing. When you’re comparing costs, start with how you’ll pay for the car. Lenders usually charge higher interest rates on used cars because they see them as a bit riskier, which is why used-car loans often end up costing more than new-car financing. It also helps to think about how long you’ll keep the car. If you plan to own it for eight to ten years, paying more upfront for a new car can make sense.
• Depreciation and resale value. New cars lose value the quickest, especially in the first few years. Used cars have already taken that big initial hit, which means their value tends to drop more slowly after you buy them.
• Warranty and maintenance. New cars come with full factory warranties and usually need fewer repairs early on. With a used car, maintenance can vary more. You might need to budget for repairs sooner or consider an extended warranty to cover unexpected issues.

With those basics in mind, we can take a closer look at how new and used cars compare in terms of cost and overall ownership.

Cost Comparison: New vs. Used Car Costs (2025)

New cars cost much more up front. As of 2025, a new car in the U.S. sells for about $48,000, whereas a used car costs around $25,000. In other words, used car and new car prices differ by over $20,000 on average.

This big gap means lower sales tax, registration fees, and often a smaller loan (or no loan) when buying used. New vehicles also tend to come with higher dealer fees and add-ons due to their higher sticker price. Used cars, being cheaper, let budget-conscious buyers save money or possibly afford a higher-end model for the same money as a base new car.

Interest Rates

New cars almost always come with lower interest rates. This is because lenders see new cars as safer collateral and manufacturers often subsidize financing.

In 2025, the average auto loan APR was about:

• 6–7% on average (sometimes 0% promotional offers) for new cars
• 10–12% on average for used cars

The higher interest rates for used cars can add thousands of dollars in interest over the life of a loan. For example, at these average rates, a $30,000 new car loan costs much less in interest than a $30,000 used car loan would.

Financing Terms and Loan Availability

Interest rates aren’t the only difference when you finance a car. New cars are usually easier to finance and come with more loan options, while used cars can be a bit more limited. Most people finance new cars because they’re more expensive. According to the Federal Reserve about 80% of new-car buyers take out a loan, compared to only 38% of used-car buyers, since many used cars are cheap enough to pay for in cash.

Because new cars cost more, the average new-car loan is bigger at around $41,500 with a monthly payment of ~$749, while the average used-car loan is about $26,500, with payments closer to $525. To make these higher prices manageable, new-car loans often stretch longer (60, 72, even 84 months). Used-car loans may be shorter (36–60 months), especially for older vehicles. Lenders sometimes limit financing for cars with high mileage or older model years.

Insurance Costs

Insuring a new car generally costs more than insuring a used car. This is mainly because a new car’s replacement value is higher; because it’s worth more, so an insurer might have to pay out more if it’s wrecked or stolen. On average, auto insurance rates drop by about 3 - 4% for every year of vehicle age. So, an eight-year-old car can be roughly 25% cheaper to insure than a brand-new car, according to the Zebra.

Maintenance and Repair Costs

Other important costs to factor in are maintenance and repairs, which grow as a car ages.

New cars come with manufacturer warranties (commonly 3 years/36,000 miles bumper-to-bumper), which mean minimal repair costs in the first few years for the owner. For a brand-new car, annual maintenance is mostly routine (oil changes, tire rotations) and can be relatively cheap (often $500 or less per year in the first 1–3 years). Some new cars even include a year or two of free scheduled maintenance from the dealer.

With a used car, especially one that’s out of warranty, you should budget more for upkeep. Parts have wear and may fail as the vehicle gets older. It’s not unusual for a 5- or 6-year-old car to need new tires, brakes, or other repairs soon. According to 2025 data, annual maintenance costs might range $800–$1,200 per year for a moderately aged used car (4–6 years old), and can hit $1,500–$2,000 per year for older (7+ year) cars.

Pros and Cons of Buying a New Car

Here are some of the main benefits of buying a new car as opposed to used, and some of the drawbacks:

When Buying New Makes More Sense?

Buying new makes the most sense when your priorities are reliability, the latest safety technology, and long-term ownership. So, buy new if you:

• Want a vehicle with no prior wear, plus complete service records from day one.
• Plan to keep the car long enough (eight to ten years) to offset depreciation.
• Qualify for 0% or low-interest financing and can budget for higher insurance and taxes.
• Need the latest safety or driver-assistance features (helpful for families or teen drivers).

Pros and Cons of Buying a Used Car

Buying used comes with real advantages, but a few trade-offs too. Here’s a quick look at both:

When Buying Used Makes More Sense?

Buying used makes the most sense when your priority is affordability and overall value. You avoid the steep early depreciation, pay lower sales tax and insurance premiums and can often purchase a higher‑trim or more prestigious model than you could afford if buying new. So, buy used if you:

• Have a limited budget or prefer to pay cash and avoid debt.
• Expect to own the car for only a few years.
• Are comfortable with a slightly older model with fewer technology features.
• Find a reliable used car with a clean maintenance history and independent inspection.

The Bottom Line: Buy a New or a Used Car?

The right choice ultimately depends on your needs and budget, but in a nutshell:

• Pick a new car if you want the latest tech, strong warranty coverage, and low-maintenance early years, but expect higher costs and faster depreciation.
• Pick a used car if you want to save money upfront, avoid the steepest depreciation, and reduce insurance costs, but be prepared for more due diligence and potentially higher interest rates.

Here’s a more in-depth side by side comparison of buying new vs used cars:

Why Certified Pre-Owned Can Be a Smart Middle Ground?

Certified pre-owned (CPO) vehicles sit between new and traditional used cars. While technically used, they must meet manufacturer age and mileage limits and pass a detailed inspection that checks major components and overall condition. Any issues are repaired with approved parts, which sets CPO models apart from regular used cars that are often sold “as is” with more variation in maintenance history.

Because CPO vehicles have already gone through the steep first years of depreciation, they typically cost less than new cars while offering added protections like extended warranty coverage, roadside assistance, and occasional special financing rates. For many shoppers, this combination of lower price and higher confidence makes CPO a practical middle ground.

CPO makes sense when you:

• Want more warranty coverage and peace of mind than a standard used car provides
• Prefer a lower price than buying new
• Like the idea of factory-backed inspections and reconditioning

If Choosing Used: Shop the Most Reliable Used Cars of 2025

If you choose to buy a used or certified pre‑owned car, what you need is reliability. These are some of the most reliable used cars of 2025, according to recent rankings by Consumer Reports:

Under 10k

Mazda6 (2014–2021)

The Mazda6 is a roomy midsize sedan with agile handling and strong four‑cylinder performance. Later models have improved noise insulation and available forward‑collision warning and automatic emergency braking.

Shop Used Mazda6 Near You

Under $15k

Toyota Corolla (2014–2019)

The 2019 redesign offers a roomy interior, a reliable 1.8‑L engine and standard Toyota Safety Sense features such as forward‑collision warning and lane‑keeping from 2017 onward.

Shop Used Toyota Corollas Near You

Mazda CX‑5 (2017–2025)

This compact SUV combines nimble handling with a comfortable ride. Low‑speed automatic emergency braking became standard in 2018, with blind‑spot monitoring and rear cross‑traffic warning. A turbocharged engine and improved infotainment arrived later.

Shop Used Mazda CX‑5 Near You

Under $20k

Toyota Camry Hybrid (2018–2024)

Delivers excellent fuel economy (about 47 mpg in CR’s tests) and includes forward‑collision warning and adaptive cruise control.

Shop Used Toyota Camrys Near You

Kia Sportage (2017–2022)

Offers a refined powertrain and roomy cabin; reliability improved after a 2020 update. The base LX trim is a good value, and power seats are desirable.

Shop Used Kia Sportage Near You

Toyota RAV4 Hybrid (2016–2018)

The hybrid powertrain introduced for 2016 provides more horsepower and better fuel economy than the non‑hybrid; reliability improved markedly by 2017–2018.

Shop Used RAV4s Near You