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Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode starts with a discussion of a showing not all workers are experiencing the same recovery from high unemployment levels.
Then we pivot to this week’s question from Irmeen, who asks, “Is it better to buy a new car or an old car? What are the pros and cons of each?”
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is a slam dunk if you want to save money. You avoid the depreciation that causes a new vehicle to lose about 30% of its value in the first year (including 20% as soon as you drive it off the lot). You’ll also pay less for insurance and registration. Today’s cars are also much more reliable than in the past, so you typically won’t face big repair bills for years.
The sweet spot for buying a used car is when it’s two or three years old. The growing popularity of leasing means there is usually a good supply of cars that age coming off their leases. These “near new” cars are still near the beginning of their useful lives and in some cases will still be covered under bumper-to-bumper warranties. Powertrain warranties often extend to 75,000 miles.
takes a little extra work. You may have to search around for a while to find what you want and to figure out what’s a good deal. Once you find a good candidate, you’ll want to check vehicle history reports such as Carfax or AutoCheck and take it to a good mechanic. Or you can pay a little more and get a “certified pre-owned” vehicle that’s passed a dealership’s inspection.
is a bit easier, and loan interest rates are also typically lower. Occasionally a combination of zero percent financing and various incentives will make a new car competitive in cost with an older one. But you typically have to go through a gantlet of people trying to upsell you stuff that you don’t need, from to paint protection to rustproofing. The best policy if you’re buying a new car is to turn down all the add-ons, since you can buy then later if you want, for a lot less money.
Cast a wide net. Comparison shopping and knowing the market are key to a good deal.
Count on reliability. Today’s cars are much more reliable, which means you won’t face big repair bills for a while.
Use a spreadsheet. These are a great tool for helping you track inventory, pricing and the key features you’re looking for in a car.
Keep the deal clean. If you buy new, avoid the upsells and warranty offers. If you want something later, you can buy it separately.