A $40,000 new car and the same model 3 years old at $24,000, both kept five years: the used car costs $34,143 all-in, the new one $45,759. That's an $11,616 win for used — about $193 a month — even after a 3-point-higher loan rate and double the maintenance budget. Here's where every dollar of that gap comes from, and the three situations where buying new actually pencils out.
Same model, two ages, five years of ownership. Prices, rates, and resale follow the typical retention curve (80% at one year, 60% at three, 45% at five).
| Line item (5 years) | 🆕 New @ $40,000 | 🔁 Used (3 yrs old) @ $24,000 |
|---|---|---|
| Monthly payment | $782.65 (6.5%, 60 mo) | $504.04 (9.5%, 60 mo) |
| Total payments | $46,959 | $30,243 |
| Interest inside those payments | $6,959 | $6,243 |
| Sales tax + fees | $3,200 | $1,900 |
| Insurance ($185 vs $150/mo) | $11,100 | $9,000 |
| Maintenance ($500 vs $1,000/yr) | $2,500 | $5,000 |
| Resale value at year 5 | −$18,000 | −$12,000 |
| Total cost of ownership | $45,759 | $34,143 |
Read the interest line twice, because it's the one everyone gets wrong. The used loan's rate is 45% higher than the new loan's — but it's charged on $24,000 instead of $40,000, so it still accrues less interest: $6,243 against $6,959. The rate penalty is real; it's just small compared with the principal gap.
A typical car holds about 80% of its price after year one, 69% after year two, 60% after three, and 45% after five. Whoever owns the car through years one to three eats the steepest part of that curve. The benchmark used-car buyer starts at 60% of original price and sells at 30% — losing $12,000 over five years — while the new-car buyer loses $22,000 over the same stretch. That $10,000 depreciation spread is most of the $11,616 verdict, and no interest rate or maintenance budget realistically closes it.
Two honest caveats. First, "typical" depreciation is a blend: body-on-frame trucks and several Japanese nameplates hold value stubbornly, while luxury sedans and some early EVs crater — always price the actual 3-year-old listing for your model rather than assuming 60%. Second, used-car inspection risk is real. A $150 pre-purchase inspection at an independent shop is the cheapest insurance in this whole decision; skip it and one bad transmission erases five years of savings.
If the numbers land close for you, the tiebreaker is rarely money. The lease payment calculator covers the third path (renting a new car instead of buying either), and the car insurance estimator pins down the insurance gap with your actual profile instead of the $35/month default we used.
On pure cost, used wins almost every time because the first owner absorbs the steepest depreciation. Our benchmark: $40,000 new versus the same car 3 years old at $24,000, both held 5 years — the used car costs $34,143 all-in versus $45,759, a $11,616 win for used. New makes sense when the model barely depreciates, when you keep cars a decade or more, or when 0% financing closes the gap.
Roughly 20%, including the drive-off-the-lot drop, on a typical vehicle. By year three the car is worth about 60% of its original price, and by year five about 45%. Slow-depreciating trucks and some Japanese brands do better; luxury sedans and some EVs do worse.
Yes — usually 2 to 4 percentage points more than new-car APRs. But the penalty applies to a much smaller principal. On the benchmark pair, the $24,000 used loan at 9.5% accrues $6,243 of interest over 5 years while the $40,000 new loan at 6.5% accrues $6,959. The higher rate never catches the smaller balance.
Often the sweet spot. A 1-year-old car is worth about 80% of new but usually still carries factory warranty, the latest safety tech, and low miles — you skip the biggest single-year drop while taking on very little risk. The savings are smaller than buying at 3 years, so it suits people who value the warranty more than the $8,000 spread.
Budget for it honestly: a 3-year-old car out of warranty might run $1,000 a year against $500 for a warrantied new one — and past year seven, tires, brakes, and suspension stack up. The calculator lets you set maintenance per car; even doubling the used car's maintenance bill doesn't flip the benchmark verdict.