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Buying a New vs. Used Car: Which Is Better?
When deciding whether to buy a new or used car, knowing the pros and cons of each can help with your decision.
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Updated · 2 min read
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Shannon Bradley is a NerdWallet authority on autos and home services. Before joining NerdWallet in 2021, Shannon spent 30-plus years as a writer, content manager and marketer in the financial services industry. In these roles, she developed financial expertise and created educational content covering a wide range of personal and business topics. Shannon is based in Newburgh, Indiana.
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Many if not most of those in the market for a car will consider whether to buy new or used. The best choice between a new car versus a used one depends on your goals and needs.
New vs. used: factors to consider
Budget and affordability. Used cars do typically cost less than new ones. But before buying either, determine how much you can afford to spend. Our car affordability calculator lets you start with the monthly payment to arrive at the maximum car price you can afford. If possible, spend no more than 10% of your take-home pay on a car loan payment and no more than 20% for total car expenses — which includes gas, insurance, repairs and maintenance.
Depreciation and resale value. Depreciation amount varies by vehicle, but according to Kelley Blue Book, most new vehicles lose 20% of their value in the first year. After that, the rate of depreciation starts to decline, so your loss when selling or trading in a used car is likely to be less than for a new one. Also, if you plan to keep a car for many years, depreciation may not be an important factor.
Financing and interest rates. Lenders offer lower financing rates on new cars because the vehicles haven’t yet depreciated and are worth more. If you default on the loan, there’s a better chance the lender can sell the car to recover losses. But interest rates from lender to lender vary, so you should always compare auto lenders to find the best rate.
Auto insurance costs. Used car insurance usually costs less than new car insurance, especially if you include comprehensive and collision coverage. Whether you buy a new or used car, compare car insurance quotes to find the best price.
Features, technology and safety. Think about your must-have features on a car and how much weight they carry in your decision. If vehicle cost isn’t a top priority for you, paying more for a new car with the exact features you want could make the most sense.
Maintenance and repairs. The warranty on a new vehicle should limit what you spend on maintenance and repairs in your first few years of owning a car. As a car gets older, maintenance and repair costs increase over time. It’s difficult to predict how much those will be, but data about the reliability of particular cars can give you an idea of which brands and models historically have fewer problems.
Pros and cons of buying a new car
If the latest features and lower maintenance costs matter the most to you, buying new may be your better choice. Trade-offs include a bigger price tag, higher insurance premiums and faster depreciation.
Pros:
More likely to have the latest safety features and technology, either standard or at an extra cost.
Comes with full warranty coverage for greater peace of mind. The typical car warranty is three years or 36,000 miles, but some are higher.
If financed, interest rates tend to be lower than for used cars, often by at least a few percentage points.
Is shiny and new without previous wear and tear. Less likely to have maintenance problems.
Can be ordered with the customizations you want, such as color and added features.
Often more fuel efficient and pollutes less compared to older models.
Cons:
Usually has a higher upfront cost than a used car.
Loses value more quickly than a used car, especially in the first few years.
Auto insurance and registration costs are usually higher.
If cost is your biggest concern — especially the monthly payment — a used car might be the best option for you. But you may have to be flexible about the type of car and features, because your selection of well-maintained, dependable cars may be limited.
Pros:
Usually has a lower purchase price than a new car.
Doesn’t lose value as quickly as a new car; the previous owner absorbs the biggest loss.
Auto insurance and registration costs are usually lower.
Cons:
Comes with no warranty coverage or only the time remaining on the original warranty. Always make sure that any time left on an original warranty can be transferred to you.
Maintenance and repair expenses may be higher.
Requires more due diligence — such as getting a vehicle history report or paying for an inspection.
If financed, interest rates tend to be higher than for new cars.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
Best for borrowers with good or excellent credit who want fast approval and funding to buy a new car.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
4.5
Est. APR:
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
6.74 - 15.24%
Term: 24 - 84 months
You will be redirected to the partner's website.
The terms presented here are estimated and provided solely to assist you
in finding a great lender. The terms may vary based on the partner's terms
and conditions.
You will be redirected to the partner's website
The terms presented here are estimated and provided solely to assist you in finding a great lender. The monthly payment amount, Annual Percentage Rate (APR), and any other terms are based on standard Consumers Credit Union rates and terms for your NerdWallet provided credit score, zip code, and the other self-provided information. These terms may vary based on your credit history, your individual income, or other terms of the lender.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
Best for applicants who want to compare multiple new car purchase loan offers.
NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account factors like maximum rates, variety of loan options, visibility of borrower requirements, accessibility, speed of funding, fees and more.
4.0
Est. APR:
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
6.24 - 29.90%
Term: 24 - 84 months
You will be redirected to the partner's website.
The terms presented here are estimated and provided solely to assist you
in finding a great lender. The terms may vary based on the partner's terms
and conditions.
You will be redirected to the partner's website
The terms presented here are estimated and provided solely to assist you in finding a great lender. The monthly payment amount, Annual Percentage Rate (APR), and any other terms are based on standard Consumers Credit Union rates and terms for your NerdWallet provided credit score, zip code, and the other self-provided information. These terms may vary based on your credit history, your individual income, or other terms of the lender.
Auto Credit Express
New car purchase loan
Not yet rated
Best for new-car buyers who can’t qualify for a lower-rate loan through a traditional lender and need help finding a dealer with subprime lending.
Min score: 525
Amount: $5,000 - $50,000
Min. Amount$5,000
Max. Amount$50,000
Not yet rated
Est. APR:
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
Annual percentage rate (APR) represents the true cost of
borrowing money. It is your interest rate plus any loan fees,
and is expressed as a percentage.
N/A - N/A
Term: 24 - 84 months
You will be redirected to the partner's website.
The terms presented here are estimated and provided solely to assist you
in finding a great lender. The terms may vary based on the partner's terms
and conditions.
You will be redirected to the partner's website
The terms presented here are estimated and provided solely to assist you in finding a great lender. The monthly payment amount, Annual Percentage Rate (APR), and any other terms are based on standard Consumers Credit Union rates and terms for your NerdWallet provided credit score, zip code, and the other self-provided information. These terms may vary based on your credit history, your individual income, or other terms of the lender.
The amount you pay for a car depends on many factors, but the averages in this table give you an idea of the differences when buying and financing a new versus used car.
The average ...
New cars
Used cars
Monthly payment
$748.
$532.
Loan amount
$42,332.
$27,128.
Interest rate
6.56%.
11.40%.
Loan term
69.07 months.
67.43 months.
Credit score
754.
691.
Source: Experian Information Solutions, 3rd quarter 2025.
Beyond your monthly payment, include insurance, fuel, maintenance, registration and taxes when comparing car costs. Our total car cost calculator enables you to enter numbers specific to you and cars you’re considering for comparison.
🤓Nerdy Tip
If you’re worried about the reliability and potential repair costs of a used car, look into certified pre-owned cars (CPO cars) sold by dealerships. CPO cars are inspected, reconditioned with factory parts and typically come with manufacturer-backed warranties. They cost more than non-CPO used cars, but they may be more reliable.
Choosing whether to buy a new or used car
There really isn’t one right answer when it comes to deciding on a new or used car. The best choice depends on the car itself; you might find a great deal on a new car or a low-mileage used car in excellent condition. It also depends on your budget, desired vehicle features and how long you plan to keep the car.
Whether you buy new or used, once you’re narrowed your choice to certain cars, take time to check online pricing guides like Kelley Blue Book, Edmunds or NADAguides to know what price you should pay. Make your own pros and cons list to compare vehicles. And pre-qualify for auto loans to get an idea of interest rate differences. Collectively, these steps can give you more confidence in the car-buying decision you make.
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