Used Car vs New Car

Used car vs new car. Want to save money on your next car? Not sure if you'll save more buying used or new?

Through an apples-to-apples comparison find out whether you save more money buying used or new.

Buying a car is big decision, it's not one that should be taken lightly. Your spending alot of money, after your home it's probably the most expensive thing you'll buy in a long time so it's important to weigh all your options very carefully. It's also very important to know the difference between what you can get and what you can afford.

I won't attempt to settle the entire used car vs new car debate, there's just too much ground to cover. Instead I'd like to focus on the costs of buying and owning new and used cars. If your goal is to save money on your next car purchase read on. The table below illustrates how new and used cars depreciate in value over a ten year period.

Used Car vs New Car

In this scenario we have 2 buyers:

• Buyer A buys a new car which costs $25,000 and drives it until the car is 10 years old.
• Buyer B buys the same car used for $15,000, it is already 2 years old and drives it for another 8 years.

* Assuming the average annual depreciation is 20%.

	Used (Buyer B)	New (Buyer A)
Paid:	$15,000 (age of car is 2 yrs)	$25,000
value 2 yrs:	$9,000 (4 yrs)	$15,000
value 4 yrs:	$5,400 (6 yrs)	$9,000
value 6 yrs:	$3,240 (8 yrs	$5,400
value 8 yrs:	$1,944 (10 yrs)	$3,240
value 10 yrs:	--	$1,944
depreciation:	$13,056	$23,056

As you can see, most of the depreciation on a car happens within the first two years of ownership. Driver A is heavily hit losing roughly $10,000 more in depreciation than Driver B who bought the car used. The clearcut winner is Driver B.

Buy used if:

• you want to save money on your next car
• you want to pay less in depreciation
• you want to spend less money upfront
• you plan on driving it for more than 4 years
• you are prepared for possibility of expensive repairs and maintenance (after 2 years).

Buy new if:

• you prefer to pay more money for the privilege of driving a new car
• you aren't too concerned about depreciation
• you plan on driving it for 4 years or less
• you want a car that is low maintenance

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