Auto guide
New or used: which is the better buy?
The price gap is not the saving. The saving is the depreciation someone else already absorbed — set against a higher rate, more repairs and a shorter remaining life.
The case for used is usually made as a price comparison: $42,000 against $27,000, so you save $15,000. That is not what you save, in either direction.
What you actually buy when you buy used is a position further down the depreciation curve. Everything else — the rate, the repairs, the remaining life — runs the other way, and the honest comparison nets them off.
What the depreciation difference really is
A new car loses value fastest in its first year. Run a new car at 20% in year one and 12% a year after, held seven years, and it gives up about 62.8% of its price. A three-year-old car bought at $27,000 is already past the steep part — at 6% in its first year with you and 12% after, it gives up about 56.3% over the same seven years, from a much smaller starting number.
The dollars are what matter: 62.8% of $42,000 is roughly $26,400. 56.3% of $27,000 is roughly $15,200. That $11,200 difference is the actual saving, and it is the reason used usually wins — not the sticker gap.
For reference, across the market as a whole, five-year depreciation averages 41.8% (iSeeCars, March 2026). That figure blends in cars bought further down the curve, which is exactly why it works as a used-car comparator and badly overstates how well a new car holds value in its first years.
What runs the other way
The rate is higher on used. Used-car loans price above new, often by two or three points, because the collateral is worth less, harder to value and more variable. On a $27,000 loan at 9.4% against a $42,000 loan at 6.9%, some of the depreciation saving goes straight back out as interest.
Manufacturer promotional financing is new-car only. A 0.9% or 2.9% promotional rate never appears on a used car. When those are available the rate gap widens considerably.
Repairs are higher and warranty is shorter. A three-year-old car is out of, or nearly out of, its factory warranty. Budget a real annual figure for this — not zero, and not the same figure as the new car.
Remaining life is shorter. Buying a car with three years already on it means you reach the replacement decision three years sooner. If you keep cars until they die, this partly cancels the saving; if you replace on a fixed cycle, it does not.
Sales tax scales with price, so used saves there too — a genuine point in used's favour that is easy to leave out.
The new versus used calculator nets all of these against each other, which is the only way to see whether the depreciation saving survives the rate and the repairs.
Where each one wins
Used is usually stronger when:
- You are comparing across the steepest part of the curve — roughly the first two to four years
- The rate gap is modest
- You keep cars a long time
- You can assess condition, or buy certified pre-owned
New has a real case when:
- Promotional financing is available at a rate no used loan will match
- You keep cars for a decade or more, where the first-year hit is spread thin
- The specific model holds value unusually well
- Warranty coverage genuinely matters to your situation — a long commute, no savings buffer, no tolerance for a car being off the road
What to ask
- What is the depreciation in dollars for each, over the years I will actually keep it? Not the price gap.
- What rate am I actually approved for on each? The used rate is the one most likely to be worse than expected.
- Is there promotional financing on the new one? If so, compare against it, not against the advertised rate.
- What is the warranty position on the used car, and what would a major repair cost?
- What does insurance cost on each? It varies by model and year and is a cost for the whole hold.
The sweet spot for most buyers is a car two to four years old: past the steepest depreciation, usually still inside or near a factory warranty, and priced well below new. But it is a calculation, not a rule, and promotional financing can flip it.
Sources: five-year market depreciation from iSeeCars, March 2026, read from the same constants the calculators use. Curve figures computed with this site's own model, at 20% first-year and 12% subsequent for the new car and 6% then 12% for the three-year-old car — the calculator's own example.