New vs Used Car: Which Is Actually Cheaper?

"Should I buy new or used?" It's the eternal car buying question. The conventional wisdom says used is always cheaper—but is it? Let's do the real math and find out.

The Obvious Cost Difference

A 3-year-old car typically costs 35-45% less than new. But purchase price is just the beginning.

Example: Honda CR-V

• 2026 New: $34,000
• 2023 Used: $24,000
• Upfront savings: $10,000

Seems like a clear win for used. But wait...

The Hidden Costs of Each

New Car Costs

Depreciation: The big one. New cars lose 20-25% in year one alone.

• 5-year depreciation on $34,000 CR-V: ~$17,000

Financing: New car rates are often lower (0-3% vs 6-10% used).

• New at 4%: $3,500 interest over 5 years
• Used at 8%: $5,100 interest over 5 years (on smaller amount)

Insurance: Slightly higher on new (more to replace).

• Difference: ~$200-500/year

Used Car Costs

Depreciation: Lower, but not zero.

• 5-year depreciation on $24,000 CR-V: ~$10,000

Maintenance: Higher as car ages.

• 3-7 year old car: ~$1,200/year
• 0-3 year old car: ~$600/year
• 5-year difference: ~$3,000

Repairs: Used cars have more unexpected fixes.

• Budget: $500-1,500/year (varies wildly)

Financing: Higher rates, shorter terms.

• Often 2-4% higher APR

Warranty: Limited or none.

• Extended warranty: $1,500-3,000 if desired

The Complete 5-Year Comparison

Scenario: Honda CR-V (Owned 5 Years)

Cost CategoryNew ($34,000)Used 3yr ($24,000) Purchase Price$34,000$24,000 Financing Interest$3,500$3,800 Depreciation-$17,000-$10,000 Insurance (5yr)$7,500$6,500 Maintenance (5yr)$3,000$6,000 Repairs (5yr)$1,000$3,500 Total Cost$27,000$33,800 Resale Value$17,000$14,000 Net Cost$27,000$33,800 Wait—new is cheaper? In this case, yes. The higher maintenance and repair costs on the used car, combined with still-significant depreciation, tip the scales.

But It's Not That Simple...

Let's try a different scenario.

Scenario: Same CR-V, Different Circumstances

Used Car Advantages:

Buy 2-year old instead of 3:

- Price: $26,500 (more warranty remaining)

- Maintenance costs lower

- Gap narrows significantly

Buy from private seller:

- Price: $21,000 (vs $24,000 dealer)

- Total cost drops dramatically

Toyota instead of Honda:

- Even lower used maintenance

- Better reliability

- Numbers shift toward used

Keep 7+ years (total):

- Longer ownership favors used

- New car's depreciation costs more over time

When New Cars Win

Scenario 1: Low Interest Rates

When manufacturers offer 0-2% financing:

• Interest savings: $3,000-$4,000
• Makes new car math work better

Scenario 2: Strong Resale Vehicles

On Tacomas, Wranglers, Civics:

• New depreciates slowly
• Used premium high (less savings)
• New can actually cost similar to own

Scenario 3: High-Mileage Drivers

If you drive 20,000+ miles/year:

• Used car warranty runs out faster
• Maintenance costs accelerate
• New car's longer warranty period matters more

Scenario 4: Specific Features Needed

When you want exact color, options, features:

• Used selection limited
• Premium for specific used config
• New custom order may be similar total cost

When Used Cars Win

Scenario 1: Cash Buyer

No financing means:

• No rate penalty for used
• Full savings of lower price
• Used almost always wins

Scenario 2: Short Ownership (2-3 Years)

Keeping briefly:

• New car depreciation devastating
• Used car depreciation minimal
• Used saves $5,000-$10,000

Scenario 3: Reliable Brands

Buying Toyota, Lexus, Honda:

• Used maintenance still low
• Reliability proven
• Depreciation already absorbed

Scenario 4: Budget Constraints

When new is out of budget:

• Used is the only option
• But buy the best used you can afford

The "Sweet Spot" Strategy

Best Used Buy: 2-3 Years Old, Under 36,000 Miles

Why this works:

• 35-45% depreciation absorbed
• Warranty often remaining
• Still "like new" condition
• Modern tech and safety
• Maintenance still low

Best New Buy: Strong Resale + Low Financing

When to buy new:

• Manufacturer 0-2% financing
• Vehicle has 55%+ 5-year retention
• You'll keep 5+ years
• Exact spec matters

The CPO Middle Ground

Certified Pre-Owned offers:

• Warranty extension (peace of mind)
• Inspection (verified condition)
• Better financing (often near-new rates)
• Premium over private sale (~$1,500-3,000)

CPO Math: OptionPrice5-Year Cost New$34,000$27,000 CPO (3yr)$26,000$28,500 Private Sale (3yr)$22,000$30,500

CPO often hits the sweet spot—lower than new, but with warranty protection.

Decision Framework

Buy New If:

• [ ] Manufacturer financing under 3%
• [ ] Vehicle has excellent resale (Tacoma, Wrangler, Civic)
• [ ] You'll keep 5+ years
• [ ] You want specific features/colors
• [ ] You value full warranty
• [ ] You're a high-mileage driver

Buy Used If:

• [ ] You're paying cash
• [ ] You'll keep 2-3 years
• [ ] You're budget-constrained
• [ ] The model is known reliable
• [ ] You can find CPO or verified condition
• [ ] You're flexible on color/options

Buy CPO If:

• [ ] You want used prices with new-like warranty
• [ ] You're financing (better CPO rates)
• [ ] You want verified condition
• [ ] The CPO premium is reasonable

Real Talk: It Depends

There's no universal answer. The right choice depends on:

• Your budget
• How long you'll keep the car
• The specific vehicle
• Financing available
• Your risk tolerance

Run the numbers for YOUR situation using our calculators.

Calculate Your Scenario

• Total Cost of Ownership
• Monthly Payment Calculator
• Trade-In Value Estimator
• Depreciation Calculator

The new vs used debate isn't about finding a universal winner—it's about finding the right answer for your specific situation, vehicle, and ownership timeline.