One of the most significant dilemmas when purchasing a vehicle is deciding whether to buy a new or used one. As we approach the end of the summer, 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 provided some new, and sometimes surprising, insights.
To crunch the numbers, we examined current deals for several popular 2023 model-year sedans and SUVs and compared them to the used-car pricing for the same models from 2021 and 2020. In some cases, with a slight increase in monthly payments, you can get a brand-new car without the mileage and with a full dealer warranty.
To illustrate our findings, the data below shows the differences in five Consumer Reports recommended vehicles: the Honda Accord and Ford Fusion sedans, and the Acura MDX, Ford Escape, and Nissan Pilot SUVs. The 2021 models have 31,000 miles, and the 2020 models have 48,500 miles. The payment amount is calculated with the assumption that the buyer puts 10% down on a 5-year loan. For the new cars, the amount listed is MSRP before incentives; for the used cars, the chart shows the dealer price. Our data uses the average New York metro-area financing rate of 3.365% for new cars and 3.310% for used cars, according to Bankrate.org. In examining current financing rates across five local areas, new car loan rates are similar to used car rates.
| Model | Year | Mileage | Monthly Payment | Total Cost Over 5 Years | Warranty |
|---|---|---|---|---|---|
| Honda Accord | 2023 | 0 | $534 | $32,040 | 3-year, 36,000 miles |
| Honda Accord | 2021 | 31,000 | $505 | $30,300 | Remaining factory |
| Honda Accord | 2020 | 48,500 | $415 | $24,900 | None |
| Acura MDX | 2023 | 0 | $600 | $36,000 | 4-year, 50,000 miles |
| Acura MDX | 2021 | 31,000 | $550 | $33,000 | Remaining factory |
| Acura MDX | 2020 | 48,500 | $460 | $27,600 | None |
The Honda Accord is an example where a new car might be worth the extra cost over a 2-year-old car. The 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 the new car with zero miles on the odometer and a full 3-year, 36,000-mile warranty.
On the other hand, choosing a 2020 Acura MDX might be a better financial decision, offering greater savings compared to the new vehicle—over $8,000 off and $119 less per month, which can offset fuel consumption and maintenance costs. Here, new trumps nearly new, although used can be a real money-saver.
For just $100 more per month, you could drive away with the new Ford Fusion or Ford Escape, as they are both awaiting all-new 2023 models. These examples show that particularly after a model year, the discounts offered might make buying a new car worth it over a used one, but it's crucial to do your research. There isn't a single sound-bite answer that fits all scenarios.
While cost is a natural focus, don't look solely at the purchase price but also consider how much the vehicle will cost to own over time. Factors such as depreciation, insurance, financing, fuel costs, and operating expenses can add up over time and may make that deal not seem so clear-cut.
New cars typically lose 20-30% of their value in the first year alone (Edmunds). This rapid depreciation can make used cars a more attractive option for those looking to maximize their investment.
Insurance rates for new cars are generally higher than for used cars. According to The Zebra, the average annual cost of insuring a new car is $1,674, compared to $1,325 for a used car.
Newer models often come with better fuel efficiency and lower emissions, which can save you money in the long run. For instance, the 2023 Honda Accord boasts a combined fuel economy of 33 MPG, compared to 30 MPG for the 2020 model (EPA).
In conclusion, whether to buy a new or used car depends on various factors, including your budget, the specific model, and your long-term financial goals. While new cars offer the latest features and warranties, used cars can provide significant savings. Always consider the total cost of ownership, including depreciation, insurance, and fuel costs, to make an informed decision.
By doing thorough research and considering all these factors, you can make a choice that best suits your needs and financial situation.
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