With new car prices hovering around $50,000 these days, buying a used car may seem like a no-brainer considering how much a new car depreciates in value in its first few years.
According to Kelley Blue Book, new cars typically lose about 30% of their value within the first two years. Additionally, Edmunds said the price difference between new and used cars has widened significantly since 2023, making used cars more attractive to buyers who want to avoid early depreciation.
But these upfront savings don’t take into account everything the buyer will end up paying. Monthly costs also depend on loan interest, repair and maintenance risks, and how long the buyer plans to keep the car. These factors can negate the benefits that many buyers expect from a used car.
“Most buyers place a lot of weight on depreciation because it’s the easiest number to understand,” said Scott Kunes, chief operating officer of Kunes Auto and RV Group. “Depreciation is absolutely important, but it shouldn’t be the primary factor. It’s the total cost of ownership that really impacts a buyer’s financial health.”
Trade-offs between new and used products
The initial cost of a new car can be significantly higher. Based on retail transaction prices tracked by J.D. Power, buyers paid an average of about $47,100 for new cars in December 2025, compared to about $29,600 for used cars.
However, financing costs for used cars tend to be higher. In the three months ending in September, the average annual percentage rate for new car loans was about 6.6%, compared to about 11.4% for used car loans, according to Experian. This difference can add up to thousands of dollars in interest over the life of the loan.
Similarly, maintenance costs vary widely between new and used cars.
While new cars often come with warranties and lower repair costs during the first few years of ownership, used cars typically have higher maintenance and repair costs as they age. According to Consumer Reports, cars older than five years typically cost about $800 to $1,000 a year in maintenance and repair costs on average.
“In many cases, a new car with a low annual interest rate and a full warranty will actually cost less per month than a lightly used car with a higher interest rate and no coverage,” Kness says.
Do the math before deciding what to buy
When comparing new and used car financing options, be sure to consider the terms.
Experian reports that new car buyers are likely to extend their financing for up to 84 months, lowering their monthly payments but potentially significantly increasing their total interest payments. For a typical $50,000 new car loan with a $10,000 down payment and 8% annual interest rate, extending the loan term from 48 months to 84 months can add nearly $5,500 in additional interest over the life of the loan.
In other words, the same car can look affordable or expensive, depending on how it’s financed. Interest rates are important, but so are the length of the loan and the amount of your down payment.
“If you plan on keeping your car for a long time, buying a new car tends to look like a better deal because the initial depreciation is spread out over a number of years,” says Kevin Roberts, director of economic market intelligence at CarGurus. “Where there is a clear purchase price advantage and you can shorten the financing term or avoid financing altogether, going second-hand tends to make more sense.”
The decision isn’t a rule of thumb, he says, but rather a purchase that aligns with how long you plan to keep the car and how much cost certainty you want.
Small changes in the APR, loan term, or down payment can make a big difference in both your monthly costs and the interest you pay, so consider using a car loan calculator to crunch the numbers before you decide which car to buy.
“The right approach is to buy the best car you can afford, whether it’s new or used,” said Joseph Yun, consumer insights analyst at Edmunds. “Gone are the days when you could absolutely get a better deal on either a new or used car.”
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