Purchasing a car often involves the critical decision of whether to buy new or used. As we approach the end of the summer season, the 2022 model year is winding down, and enticing deals are being offered. But in these dynamic economic times, does the conventional wisdom still hold true that it's more cost-effective to buy used rather than new? Our analysis provides fresh and sometimes surprising insights.
Deciding between a new or used car can be challenging, especially with the 2022 model year winding down and attractive deals on the table. This article delves into whether it's safer and more cost-effective to buy a used car, comparing current offers on popular 2022 models with their 2020 and 2019 counterparts. We examine the financial implications, including depreciation, insurance, and maintenance costs, to help you make an informed decision.
One of the most significant challenges when purchasing a car is deciding whether to buy new or used. As the 2022 model year comes to a close, many dealerships are offering tempting deals. But does the age-old advice that buying used is more economical still hold true?
To crunch the numbers, we examined current offers on several popular 2022 model-year sedans and SUVs and compared them to the prices of similar models from 2020 and 2019. In some cases, with a slight increase in monthly payments, you can get a new car with no mileage and a full manufacturer warranty.
The table below highlights the differences for five Consumer Reports recommended vehicles: the Honda Civic and Chevrolet Malibu sedans, and the Acura MDX, Ford Escape, and Honda Pilot SUVs.
| Model | Year | Mileage (miles) | Monthly Payment (USD) | MSRP (New) | Retail Price (Used) |
|---|---|---|---|---|---|
| Honda Civic | 2022 | 0 | $534 | $25,000 | N/A |
| Honda Civic | 2020 | 29,000 | $505 | N/A | $20,000 |
| Honda Civic | 2019 | 47,000 | $415 | N/A | $18,000 |
| Acura MDX | 2022 | 0 | $650 | $45,000 | N/A |
| Acura MDX | 2020 | 30,000 | $600 | N/A | $35,000 |
Data Source: Consumer Reports, Bankrate.com
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. When examining current financing rates in five local areas, new car interest rates are generally similar to those for used cars.
For instance, a lightly used 2020 Honda Pilot would cost $505 per month, while a brand-new 2022 model would run $534 per month. For an extra $29 per month, totaling $1,766 over five years, you get a new car with zero miles and a full 3-year, 36,000-mile warranty.
When considering the total cost of ownership, it's essential to look beyond the purchase price. Factors such as depreciation, insurance, financing, fuel costs, and other operating expenses can quickly add up over time.
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 a more financially sound choice.
Insurance premiums for new cars are generally higher than for used cars. Additionally, while new cars come with warranties that cover major repairs, used cars may require more frequent maintenance and repairs, which can add to the overall cost.
While the allure of a new car with its latest features and full warranty is strong, the financial benefits of buying a used car can be substantial. However, the decision isn't one-size-fits-all. It's crucial to consider not just the purchase price but also the long-term costs, including depreciation, insurance, and maintenance. By doing thorough research and comparing options, you can make a more informed decision that best suits your financial situation and driving needs.
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