Purchasing a vehicle is a significant financial decision, and one of the most common dilemmas is whether to buy new or pre-owned. As we approach the end of the year, dealerships are offering enticing discounts on new models. But does the conventional wisdom that buying used is cheaper still hold true in today's economic climate? Our research provides some surprising insights.
To understand the financial implications, we analyzed current offers for several popular 2022 model-year sedans and SUVs and compared them to the prices of the same models from 2020 and 2019. In some cases, with a slight increase in monthly payments, you can get a brand-new car with zero mileage and a full manufacturer’s warranty.
Here are some examples to illustrate our findings:
| Vehicle Model | Year | Mileage | Monthly Payment | Total Cost Over 5 Years |
|---|---|---|---|---|
| Kia Optima | 2022 | 0 | $534 | $32,040 |
| Kia Optima | 2020 | 30,000 | $505 | $30,300 |
| Acura MDX | 2022 | 0 | $600 | $36,000 |
| Acura MDX | 2019 | 47,500 | $481 | $28,860 |
Source: Bankrate.com
Our calculations are based on the average New York City metro-area finance rate of 3.365% for new cars and 3.310% for used cars, according to Bankrate.com. Interestingly, current financing rates for new cars are comparable to those for used cars.
For some models, such as the Nissan Rogue, the new car is worth the extra cost. The 2022 model costs $534 per month, while the 2020 model costs $505 per month. For an additional $29 per month, totaling $1,766 over five years, you get a new vehicle with zero miles and a full 3-year, 36,000-mile manufacturer’s warranty.
On the other hand, opting for a 2019 Acura MDX can offer significant savings. The 2019 model costs $481 per month, which is $119 less per month than the new model, resulting in a total savings of $7,140 over five years.
While the initial cost is a crucial factor, it’s essential to consider the total cost of ownership over time. This includes:
According to Edmunds, a new car loses about 20% of its value within the first year and about 60% after five years. In contrast, a used car has already undergone significant depreciation, making it a more stable investment.
The decision to buy new or used depends on various factors, including your financial situation, the specific model, and your long-term plans. While new cars offer the latest features and warranties, used cars can provide substantial savings. It’s crucial to do thorough research and consider all aspects of ownership before making a decision.
By weighing these factors, you can make a more informed decision that aligns with your financial goals and lifestyle needs.
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