When it comes to purchasing a vehicle, one of the most significant decisions you'll face is whether to buy new or pre-owned. As we approach the end of the year, the 2023 model year is winding down, and enticing deals are being advertised everywhere. In these dynamic economic times, does the conventional wisdom still hold true that it's cheaper to buy used rather than new? Our analysis provides fresh, and sometimes surprising, insights.
As the 2023 model year comes to a close, car buyers are faced with the age-old dilemma: new or pre-owned? While conventional wisdom suggests that used cars are more economical, recent data reveals some unexpected trends. By comparing current deals on popular 2023 models with their 2021 and 2019 counterparts, we uncover whether the savings on pre-owned vehicles are worth it. This article dives into the specifics, offering a detailed comparison and highlighting key factors to consider.
To break down the numbers, we examined current deals for several popular 2023-model-year sedans and SUVs and compared them to the used-car prices for the same models from 2021 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 warranty.
To illustrate our findings, the data below highlights the differences for five Consumer Reports recommended vehicles: the Toyota Camry and Honda Accord sedans, along with the Acura MDX, Ford Escape, and Chevrolet Traverse SUVs. The 2021 models have 28,000 miles, and the 2019 models have 47,000 miles. Monthly payments are calculated assuming the buyer puts 10% down on a 5-year loan. For new cars, the price listed is the MSRP before incentives; for used cars, the data shows the retail price. The data uses the average New York City metro-area financing rate of 3.365% for new cars and 3.310% for used cars, according to Bankrate.
| Vehicle Model | Year | Mileage | Monthly Payment | Total Cost Over 5 Years |
|---|---|---|---|---|
| Toyota Camry | 2023 | 0 | $534 | $32,040 |
| Toyota Camry | 2021 | 28,000 | $505 | $30,300 |
| Toyota Camry | 2019 | 47,000 | $486 | $29,160 |
| Honda Accord | 2023 | 0 | $520 | $31,200 |
| Honda Accord | 2021 | 28,000 | $490 | $29,400 |
| Honda Accord | 2019 | 47,000 | $470 | $28,200 |
| Acura MDX | 2023 | 0 | $650 | $39,000 |
| Acura MDX | 2021 | 28,000 | $620 | $37,200 |
| Acura MDX | 2019 | 47,000 | $600 | $36,000 |
| Ford Escape | 2023 | 0 | $480 | $28,800 |
| Ford Escape | 2021 | 28,000 | $450 | $27,000 |
| Ford Escape | 2019 | 47,000 | $430 | $25,800 |
| Chevrolet Traverse | 2023 | 0 | $560 | $33,600 |
| Chevrolet Traverse | 2021 | 28,000 | $530 | $31,800 |
| Chevrolet Traverse | 2019 | 47,000 | $510 | $30,600 |
The Chevrolet Traverse is one example where a new car might be worth considering over a 2-year-old vehicle. The freshly updated 2023 model would cost $534 per month, while the 2021 version would run $505. For an additional $29 per month, totaling $1,740 over five years, you get a new vehicle with zero mileage and a full 3-year, 36,000-mile warranty.
On the other hand, opting for a 2019 model can offer substantial savings compared to a new car. For instance, the 2019 Acura MDX costs $600 per month, which is $50 less than the 2023 model, saving you $3,000 over five years. This can offset the mileage and potential maintenance costs.
These examples illustrate that particularly at the end of the model year, the deals available might make it worth considering a new car over a used one. However, it's crucial to shop around. There isn't a one-size-fits-all answer that applies to all situations.
While the sticker price is an important consideration, don't just look at the cost to buy, but also how much the vehicle will cost to own over time. Factors such as depreciation, insurance, financing, fuel costs, and other operating expenses can add up over the years and might make that deal not look so good in the long run.
New cars typically lose about 20% of their value within the first year and around 60% after five years (Edmunds). This rapid depreciation can make used cars more appealing from a financial perspective.
Insurance rates are generally higher for new cars compared to used ones. According to The Zebra, the average annual cost of insuring a new car is $1,674, while insuring a used car costs around $1,325.
While new cars come with warranties that cover many repairs, used cars might require more maintenance. However, certified pre-owned (CPO) vehicles often come with extended warranties and have undergone thorough inspections.
In conclusion, whether to buy a new or pre-owned car depends on various factors, including your budget, the specific model, and the deals available at the time. By considering the total cost of ownership and not just the purchase price, you can make a more informed decision that best suits your needs and financial situation.
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