In today's dynamic economic landscape, the age-old debate of whether to buy a new or used car remains relevant. As we approach the end of summer, the 2023 model year is winding down, and enticing deals are being advertised at every turn. But does the conventional wisdom still hold true that it's cheaper to buy used rather than new? Our analysis provides some surprising insights.
To break down the numbers, we examined current promotions 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 without the mileage and with the full manufacturer's warranty.
We analyzed several Consumer Reports recommended vehicles, including the Toyota Camry and Honda Accord sedans, as well as the Acura MDX, Ford Escape, and Honda Pilot SUVs. Here are the details:
| Vehicle Model | Year | Mileage | Monthly Payment | New Car MSRP | Used Car Market Price |
|---|---|---|---|---|---|
| Toyota Camry | 2023 | 0 | $450 | $25,000 | N/A |
| Toyota Camry | 2021 | 28,500 | $420 | N/A | $20,000 |
| Toyota Camry | 2019 | 47,000 | $380 | N/A | $15,000 |
| Honda Pilot | 2023 | 0 | $534 | $35,000 | N/A |
| Honda Pilot | 2021 | 28,500 | $505 | N/A | $30,000 |
| Honda Pilot | 2019 | 47,000 | $415 | N/A | $25,000 |
Source: Consumer Reports
Our calculations are based on the average New York metro-area financing rate of 3.365% for new cars and 3.310% for used cars, according to Bankrate.com. In some urban areas, new car loan rates are similar to those for used cars.
The Honda Pilot is an example where a new car might be worth considering over a 2-year-old vehicle. The lightly refreshed 2023 model would cost $534 per month, while the 2021 model would run $505. For an extra $29 per month, totaling $1,766 over five years, you get a new car with zero miles on the odometer and a full 3-year, 36,000-mile warranty.
However, opting for the 2019 Pilot might be a better financial choice, offering more savings compared to the new car, with $8,000 off and $119 less per month, which could offset fuel consumption and maintenance costs. Here, new trumps nearly new, but used is a genuine way to save money.
In certain cases, like the Toyota Camry or Honda Accord, for $100 more per month, you could drive off with the new model, as they are often discounted in anticipation of all-new 2024 models.
While price is a natural focus, don't look solely at the cost to buy, but also how much the vehicle costs to own over time. Factors such as depreciation, insurance, financing, fuel costs, and other operating expenses can quickly add up and may make that bargain not seem so great after all.
New cars typically lose about 20% of their value within the first year and around 60% after five years. Used cars, on the other hand, have already undergone significant depreciation, which can be a financial advantage.
Insurance rates for new cars are generally higher than for used cars. According to the Insurance Information Institute, the average annual cost of car insurance in the U.S. is about $1,190, but this can vary widely based on the car's age, make, and model.
Newer models often come with better fuel efficiency and lower maintenance costs. For instance, the 2023 Toyota Camry has an average fuel economy of 32 MPG, compared to 28 MPG for the 2019 model. Over time, these savings can add up.
These examples show that primarily following the model year, the deals available can make it worth choosing a new car over a used one, but it's essential to do your research. There isn't one definitive answer that fits all scenarios. While price is a crucial factor, consider the total cost of ownership over time to make an informed decision.
In summary, whether to buy a new or used car depends on various factors, including your financial situation, the specific models you're considering, and the deals available at the time. Always weigh the pros and cons and consider the long-term costs before making your decision.
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