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Bottom Line Up Front

  • New cars are fun and reliable, but they’re more expensive and can lose their value quickly.
  • Used cars are more affordable upfront, but you might need to put in additional effort and money to maintain them.
  • Your needs and budget play a major role in what you can afford—and what you buy.

Time to Read

8 minutes

October 11, 2023

Deciding whether it’s better to buy a new or used car isn’t simply a matter of price. Both options have their pros and cons, and making the best decision for your needs comes down to evaluating the many factors that go into buying and owing a car—beyond simply what you’re able to afford.

As you enter the car-shopping market, think about what’s important to you as a driver and a car owner. Then, objectively evaluate whether to get a used or new car based on a range of purchase and ownership factors. These can include vehicle availability, potential maintenance costs and desired built-in technology.

Should I Buy a New or Used Car?

Much of your buying decision comes down to you: your financial situation, personal preferences and car-buying plan. Here are some important factors to consider before you make a final decision:

  • How much car can you really afford? While sticker price and monthly payment are big factors to consider, they aren’t the only ones. You also need to weigh the cost of taxes and titling fees, insurance, and maintenance, as well as the average expenses of filling the gas tank and general upkeep such as oil changes. Examine your budget to account for your income and current monthly obligations to get an accurate picture of what you can afford to buy without overextending yourself. Leave room for unexpected expenses and fun stuff!
  • Can you reduce your repayment amount? If you’re able to put more money down upfront, you can lessen your monthly payments as well as save thousands of dollars over the term of your auto loan. Consider whether you can trade in your current car, to lower the purchase price of a new or used vehicle. Also, look into getting preapproved for an auto loan. That can help you lock in a favorable interest rate and repayment term as well as give you advantage to negotiate a better sales price at the dealership.
  • What features are must-haves for you? You want to like the car you buy, and features are a big part of your purchase satisfaction. Prioritize the features you need—navigation, fuel economy (or range, for electric vehicles), safety, infotainment, etc. If you can find a used vehicle that checks the boxes, great! If you choose to buy new, make sure the features are worth what you’re paying for them.
  • What incentives is the dealer offering? When you purchase a new car, dealerships often offer perks such as low-interest financing rates, free services and cash-back rebates. Used car dealerships don’t generally offer these kinds of incentives. However, Certified Pre-Owned (CPO) car programs do offer warranties, roadside assistance and maintenance agreements. Determine any specific incentives before signing on the dotted line.

The Pros and Cons of Buying a NEW Car

Buying a brand-new vehicle is an appealing proposition. Who doesn’t love the idea of getting behind the wheel of a car that’s fresh off the factory floor? Although there’s an undeniable charm and sense of pride that comes with driving a new car, it’s still a major investment.

With that in mind, you’ll need to weigh the pros and cons of a brand-new vehicle (and car loan) carefully.

Pros of Buying a New Car

  • Latest features and technology. If having access to the newest innovations is important to you, a new vehicle holds strong appeal. Practical benefits include fuel-efficient engines, better safety features, intelligent infotainment systems and reliable mechanical systems. What driver doesn’t love the latest bells and whistles?
  • Better financing options. If you’re planning to finance your car, you’ll be more likely to get a lower interest rate on a new car than a used one. New cars have a higher resale value and are less likely to have mechanical issues. That means the lender is less likely to lose their investment if you can’t make your payments. Plus, manufacturers often offer promotions or incentives, so dealers can pass these savings on to their customers.
  • Peace of mind. A new car comes with a mechanical clean slate and an extensive manufacturer’s warranty that covers most repairs—usually for a minimum of 30,000 miles. You can drive worry-free, knowing you’re protected against faults and defects. Plus, new cars generally are viewed as more reliable than used cars because they have no miles on them and are in mint condition.
  • Customize your options. A dealer’s supply of new vehicles tends to run the gamut of makes and models. That means you have more options in terms of customizing the features and accessories you want—everything from car color to the technology package. You won’t need to hunt around to find the cherry-red finish and heated leather seats you want!

Cons of Buying a New Car

  • Depreciation. Although new cars come with a shine, they’re subject to steep depreciation. This means your brand-new car loses a significant chunk of its original value as soon as it leaves the dealership simply because it’s no longer “new.” As the mileage goes up, the value goes down.
  • Higher insurance cost. New cars tend to come with higher insurance premiums than their used counterparts. This is mainly because new cars are more valuable and therefore more expensive to repair or replace in the event of an accident. Expect the average cost of your monthly insurance to rise after buying a new car.
  • Higher taxes. In most states, sales tax is based on the purchase price of the vehicle. This means that buying a brand-new car comes with higher taxes. Keep this in mind when evaluating your budget to see what you can afford.

Featured Content

Auto Learning Center

Buying a car doesn’t begin and end with a trip to a dealership. Before you get started, here’s what you need to know about getting a great deal, financing and more.

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The Pros and Cons of Buying a USED Car

Traditional used cars often get a bad rap just because of their name. “Used” implies wear and tear or damage. That said, there are plenty of used cars that are in great condition—including those that were gently driven, were owned for only a short period (leased) or have low mileage.

Before signing on the dotted line, you can take a few steps to do your due diligence, especially if you’re buying from a private seller. Look into the vehicle’s history and ask a trusted certified mechanic to carefully check the car for any defects.

If you’re truly wary about buying a used car, consider a Certified Pre-Owned (CPO) model. If your next car is a CPO, you can be confident it has been thoroughly inspected by the dealer’s service department, and meets or exceeds the manufacturer’s minimum requirements.

Pros of Buying a Used Car

  • Less expensive. One of the biggest advantages of buying a used car is the price tag. Used cars are less expensive than new cars of the same make/model, and buying a previously owned vehicle can save you thousands both upfront and over the term of an auto loan. You’ll also need to pony up less of a down payment for a used car.
  • More room for negotiations. In addition to lower sticker prices, dealers often are more open to negotiating with sellers who are interested in a used car. With a little haggling, you could get anything from free oil changes to a higher trade-in bonus.
  • Lower insurance costs. Because their value is already depreciated, used cars aren’t subject to the same high insurance rates that new vehicles typically incur. Expect to insure a used car for cheaper than you would be able to cover a brand-new model. This can result in significant savings over the life of the vehicle. 
  • Less depreciation. While new cars lose value quickly—often up to between 20% and 30% in the first year alone—used cars already have depreciated based on their condition. While a used car’s value will still drop over time, you’ll avoid paying for equity that no longer exists.

Cons of Buying a Used Car

  • Mechanical considerations. While used cars can be a great value, one downside is that they may require more maintenance and repairs compared with new cars. This can cost more money over time—and may be less convenient if the car needs frequent repairs. Whenever possible, buy from a seller that offers a used car warranty. You can prepare for anticipated maintenance expenses by putting some money aside to cover those costs.
  • Outdated tech and parts. At the rate vehicles are changing these days, a car that’s even a few years old might lack important safety or economical features. Plus, the older a vehicle becomes, the more expensive its parts and services generally are. This tends to be a concern with electric and hybrid vehicles in particular since EV and battery technologies are still evolving.
  • Higher interest rate. If your credit score isn’t high, you may be offered a higher interest rate when financing a used car compared with a new car. This can make the overall cost of a used car higher, even if the sticker price is lower. The good news is that the inverse also applies: Having a higher credit score could help you secure cheaper financing on a used car.

Buying a car is a personal decision that depends on your budget, lifestyle, needs and wants. Whichever option you choose, make sure to do your research, ask questions and negotiate a fair price.

See How Navy Federal Can Help You Get Your Next Car

Eager to get behind the wheel of a new or new-to-you vehicle? Navy Federal is here to help with everything you need to research, finance and protect your next car.

Navy Federal’s Car Buying Service, powered by TrueCar®1 gives you quick and easy access to search thousands of new or used vehicles from popular brands and view upfront prices online.

With a Navy Federal auto loan on a new or used vehicle, you could get preapproved for an auto loan to take advantage of the competitive financing available to you as an NFCU member.

Car Buying Center

We can help you find everything you need to finance, buy, research, protect and enjoy your next car. Plus, you could enjoy great discounts, too!

Car Buying Center

We can help you find everything you need to finance, buy, research, protect and enjoy your next car. Plus, you could enjoy great discounts, too!

Next Steps Next Steps

  1. Check out Navy Federal Credit Union’s Car Loan Calculator to help you figure out how much car your budget will allow. Remember to also budget for gas, upkeep, and unexpected or emergency repairs.
  2. Research dealerships in your area to see what kind of incentives they’re running on new and used vehicles, as well as hybrid and electric models. These can include rebates, financing opportunities, and cash-back or trade-in incentives.
  3. Get preapproved before you start talking to a dealer. Whether you purchase new or used, dealers often try to get car buyers to finance through their own loan partners. Bring your preapproval with you to show that you already have access to financing.

Disclosures

1

TrueCar operates the Navy Federal Car Buying Service. Navy Federal is not responsible for any purchase, lease, or service provided by or through the Navy Federal Car Buying Service.

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.