📋 Overview
Buying a 2–3-year-old used car instead of new saves roughly 40% in 5-year total cost of ownership. The savings come almost entirely from depreciation - new cars lose 20–25% in year one. Here is the real math, with 2026 prices.
📝 Step-by-Step Checklist
- Compare purchase priceNew compact SUV (e.g., 2026 RAV4 LE): $30,000 MSRP, ~$32,500 OTD. 3-year-old used (2023 RAV4 LE, 35k miles): ~$22,000 OTD. Savings: $10,500 up front.
- Compare depreciationNew car loses 20–25% in year 1, 10% in year 2, then 10%/year. 5-year depreciation on the new RAV4: ~$15,000. On the used: ~$8,500. Used wins by $6,500.
- Compare financingNew car at 7% APR for 60 months on $32,500: $643/month, $6,069 interest. Used at 8% APR for 48 months on $22,000: $537/month, $3,773 interest. Used wins by $2,300.
- Compare insuranceNew cars cost 15–25% more to insure (higher comp/collision). Average premium: new RAV4 ~$1,800/yr; used 2023 RAV4 ~$1,500/yr. 5-year savings: $1,500.
- Compare repairs and maintenanceNew car: ~$2,000 over 5 years (mostly tires, brakes, oil). Used 3-year-old: ~$4,500 over 5 years (add water pump, more brake jobs, possibly a battery). New wins by $2,500.
- Compare fuel and registrationRoughly equal for the same model. Slight edge to new for marginally better MPG and rebated reg fees in some states. Call it a wash.
- Add it up - 5-year totalNew RAV4 total: $30,000 (depreciation + interest + insurance + maintenance + fees) – $15,000 residual = ~$25,000. Used 2023 RAV4 total: $22,000 – $13,500 residual = ~$17,000. Used wins by $8,000.
- Run the same math against a beaterBeater $5k Corolla: $1,500/yr depreciation + $1,500 maintenance + $1,200 insurance = $4,200/yr. New RAV4: ~$5,000/yr equivalent. Beater wins again - for the right buyer.
🔗 Related Guides
❓ Frequently Asked Questions
Is it always cheaper to buy used?
In 2026, yes - by roughly 40% over 5 years for the same model 2–3 years old. The exception: 0% APR new-car deals can occasionally beat used financing.
How much does a new car lose in the first year?
20–25% on average. Luxury and electric cars lose more (30–40%). Trucks, certain SUVs, and Toyota/Honda compacts lose less (15–20%).
Is buying a 1-year-old used car worth it?
Yes. A 1-year-old car has lost 20% of its value, still has most of the factory warranty, and is essentially a new car at a 20% discount.
Are new cars cheaper to maintain?
Yes, but not by enough to offset depreciation. New: ~$400/yr. 3-year-old: ~$900/yr. The $500/yr difference is dwarfed by $2,500/yr extra depreciation on a new car.
What about hybrid and EV used cars?
EVs depreciate faster (30–40% year 1) due to battery uncertainty. A 3-year-old EV is one of the best deals in used cars - IF you verify battery health.
Should I lease instead?
Leasing is almost always more expensive than buying used. Lease only if you need a new car every 3 years and don't drive over 12k miles/year.