Is It Easier to Purchase a Pre-Owned Vehicle?

Comparing Costs: New vs. Used Vehicles

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 similar models from 2021 and 2019. In some cases, with a slight increase in monthly payments, you can get a new vehicle with zero mileage and a full manufacturer’s warranty.

Example Analysis

The table below highlights the differences between five Consumer Reports recommended vehicles: the Ford Fusion and Honda Accord sedans, and the Acura MDX, Honda CR-V, and Ford Escape SUVs. The 2021 models have 30,000 miles, and the 2019 models have 48,000 miles. The payment amount is calculated assuming the buyer puts 10% down on a 5-year loan. For new vehicles, the price shown is the MSRP before incentives; for used vehicles, the chart shows the dealer price. Our calculations are based on the average New York metro-area interest rate of 3.365% for new cars and 3.310% for used cars, according to Bankrate.com.

Key Insights

For instance, the Honda CR-V is one model where a new car might be worth purchasing over a 2-year-old vehicle. A slightly refreshed 2023 model might cost $480 per month, while the 2021 version would run $450. For an extra $30 per month, totaling $1,800 over five years, you get a new car with zero miles and a full 3-year, 36,000-mile warranty.

However, opting for a 2019 CR-V could be a better financial decision, offering more significant savings than the new car—over $8,000 in total, including maintenance. While new often beats nearly new, used is a proven way to save money.

The Acura MDX is another example where the 2019 model might be a better option. However, in some cases, like the Toyota Camry or Honda Accord, for $100 more per month, you could drive away with the new model, as both are discounted in anticipation of the all-new 2024 models.

Factors to Consider

These examples illustrate that right after the model year, the deals available might make it worth choosing a new car over a used one, but it’s crucial to shop around. There isn’t a one-size-fits-all answer that applies to every situation.

While the final cost is a natural focus, don’t look solely at the purchase price but also consider how much the car 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 can make that deal not seem so sweet after all.

Interesting Stats

• According to Edmunds, the average transaction price for a new car in 2023 is around $47,000, while the average price for a 3-year-old used car is approximately $31,000.
• The depreciation rate for new cars is steepest in the first year, with vehicles losing about 20-30% of their value, according to Carfax.
• A study by iSeeCars found that the average 3-year-old car has depreciated by 39.1% from its new price.

Conclusion

In conclusion, while buying a new car can sometimes be more appealing due to the latest features and full warranties, purchasing a pre-owned vehicle often provides significant savings. It’s essential to consider all factors, including depreciation, insurance, and maintenance costs, to make an informed decision that best suits your financial situation and needs.