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    Auto Loan Options: New Vs. Used Cars

    Auto Loan Options: New Vs. Used Cars

    Buying a vehicle involves a substantial financial decision for most people. If you find yourself conflicted between purchasing a new car and a used one, you’ll need to run a deeper analysis.

    Getting a new vehicle can be a great feeling. You’ll have this sense of ownership and reassurance that comes with being a first-time car owner. This might not be the case if you get a pre-owned vehicle. As enticing as it is, buying a new car could cause a bit of financial jeopardy if you don't have enough funds or a plan in a place.  

    On average, an individual might spend somewhere around $30,000 on a car. Getting pre-used cars could save almost half that money. It’s important to be aware that when it comes to financing, there’s a significant change in the rates offered depending on the car, whether it be new or used.

    An Example And Comparison

    One of the most important factors that you need to take into account when is the car’s depreciation rate. Ideally, a new car loses almost 20% of its value immediately after you purchase it. So, a new car costing $30,000 will lose $6,000 the moment you drive it out of the parking lot.

    Let’s say you buy a new car at $30,000 and sell it for $15,000 after three years. That’s $15,000 in depreciation. Now, let’s say you buy the same car, but it’s been used for three years, at $15,000. You can resell the car after three years at $10,000. That’s just $5,000 in depreciation. 

    The following table gives you a clear comparison of auto loan options for both a new car or a pre-owned car:

    Cost Price

    Loan Term

    Monthly Payment

    Total Payment

    End of Term Value

    Total Loss

    New Car


    5 years





    Used Car


    4 years





    As shown in the table, the total loss after a certain period of time is more for a new car when compared to a pre-owned one. If you’re looking from a long-term perspective, getting a pre-owned vehicle might be better considering the depreciation value of a new car after a small period of time.

    Advantages And Disadvantages Of Buying A New Car


    • Shopping for a new car is a relatively straightforward process and will save you a lot of time and effort. Every new car is mint condition and you usually won’t have to go through the struggle of evaluating it
    • You can get better interest rates and other incentives 
    • You can get better gas mileage, which will save you a lot of money on fuel costs
    • A new vehicle is more reliable when compared to a used one. Mechanical issues with the new car are covered by factory warranty terms for at least a period of three years


    • The major downside of a new car is the depreciation in value the second you leave the lot. Even if you choose car financing, you might have to pay a massive sum as a down-payment
    • The longer you drive the car, the lower its resale value gets
    • Newer cars involve shelling out more money from the start, like the price as well as higher insurance costs

    Advantages And Disadvantages Of Buying A Used Car


    • It’ll cost you less money
    • You can work around with a comprehensive coverage policy that will save you big bucks
    • Registering costs are way less in the case of pre-owned cars
    • When you’re looking into second-hand cars, you can go for more sophisticated or luxurious models that are within your budget


    • Lack of reliability and the fact that you’ll often take it to your mechanic for repairs and performance issues
    • You might also end up compromising on certain preferences, like the color of the car or other attributes, since your primary focus is on finding a car in good shape

    CPOs - A Reliable Middle Ground

    A Certified Pre-Owned Vehicles (CPO) program can be a significant advantage if you want to spend less money on a reliable vehicle.

    Vehicles registered under this program are more reliable than the ones that aren’t. Therefore, you can be assured that you’ll get more efficient mileage, incur less damage, and so on. The program demands strict inspections and approval before the registration, thus allowing for fewer chances of something to go wrong. 


    Purchasing a car, be it new or pre-owned, demands a lot of research and careful consideration. Prioritize your personal preferences and compare your options accordingly. 

    New vehicles might not be the most cost-effective, but it’ll give you the most reassurance. Meanwhile, pre-owned cars will save you money, but they could end up failing in terms of performance. 

    Consider the advantages and disadvantages listed above so you can choose wisely. This will help you avoid financial issues and spare you the headache later down the road.