Do you really need a new car?

Pros and cons of buying new

If you’re leaning toward buying new — well, because it’s truly new — consider the additional perks but also the potential downsides.

» MORE: Best new car warranty

Pros of buying new

It feels good to be the first owner of a vehicle, of course, but what other advantages does a new-new car offer?

• It’s a brand-new car: To some folks, you just can’t beat that new-car smell. There’s a sense of pride, accomplishment and ownership in knowing you’re the first — and only — owner of your new vehicle. Plus, newer cars often have better safety, tech and performance features that make them worth the upcharge.
• Factory warranty: All new vehicles sold in the U.S. come with at least a three-year/36,000-mile bumper-to-bumper warranty that guarantees against factory defects and covers any necessary repairs with a $0 deductible. Some even stretch to five years/60,000 miles.
• Lower interest rates: Auto lenders typically offer lower interest rates on new cars because used cars are harder to accurately value. When lenders can’t accurately assess the value of the collateral, they charge higher interest to compensate for the increased risk.
• Option to lease: Leasing gives you the option to “rent” a vehicle for 36 or 48 months without committing to a full purchase — and at a monthly rate that’s comparable to financing a used vehicle. While a handful of dealerships have begun offering leases of certified pre-owned (CPO) vehicles, for the most part, leasing is only an option for new vehicles.

» COMPARE: Leasing vs. buying a car: pros and cons

Cons of buying new

The prospect of buying new is exciting, but make sure you know the drawbacks — you don’t want buyer's remorse.

• Rapid depreciation: New vehicles tend to lose about 20% of their value within the first year of ownership and 15% annually until year five.2 Foreign luxury brands like Mercedes and BMW tend to depreciate even more quickly. As a result, buying new puts you at a much higher risk of going upside-down on your auto loan, meaning you owe more than the vehicle is worth. You can mitigate this with a higher down payment or by purchasing gap insurance, but both options can impact your overall budget.
• The dealership experience: Unless you’re buying a Tesla or a Rivian, you’ll be going through a dealership to buy or lease a new car. And since most dealers are independently owned and operated, your dealership experience can range from smooth and friendly to manipulative and tiresome.
• Early adopter woes: New vehicles, especially ones that are part of a new generation (like the C8 Corvette) or have been built from the ground up (like the Rivian R1T), are often subject to defects or issues that can take a year or two to iron out. (Early adopters of the Tesla Model Y probably didn’t know their $50,000 EVs would be the most-recalled vehicle of the past decade, for instance).

  By contrast, shoppers in the used market have fewer unknowns when it comes to build quality and reliability.

• Pricier insurance: Generally speaking, new cars tend to be more expensive to insure than used cars. However, if you’re comparing a new car with a used car with a similar market value and the new car has better safety features, the former might actually be cheaper to insure.

» CALCULATE: How much is car insurance?

New vs. used vs. CPO cars

The No. 1 perk of buying used, by far, is the cost savings. Most cars lose 20% of their value in year one and 15% annually after — while a 2023 model may cost $50,000, a gently used 2020 model might cost as little as $28,900.

While automakers and dealers may have you believe the brand-new model is light-years better than last year’s dismal donkey cart, the truth is that most vehicles iterate very slowly. In some cases, vehicles don’t change at all between model years, and the only thing separating a 2021 and a 2023 is the price and mileage.

That’s why it’s worth checking to see how “new” a new car really is. Sites like Edmunds can help you see what changes and features have been added for each model year (e.g., more power, blind-spot monitors, etc.) and from there determine if the upgrades are worth the cost of buying new.

When is buying used worth it?

Used cars are generally cheaper to insure, but with the same caveat above: as long as they’re lower value. To illustrate, a used Toyota GR86 will certainly cost less to insure than a new one, but a used Porsche Cayman may cost more than both due to its high cost of repairs.

According to McKinsey research, the used car market is more than twice the size of the new car market, and the gap is widening. That means that if you expand your search to a wider array of model years, you’re much more likely to find the exact car you want versus buying new. Plus, better selection means more opportunity to negotiate.

» DO IT RIGHT: How to buy a used car

While brand-new cars aren’t bulletproof themselves, used cars can hide even more surprises under the hood; you’ll never know exactly how they were treated. From the photos alone you may not be able to tell if there’s hidden rust, the sunroof doesn’t work or if the engine has been thrashed at the racetrack.

That’s why you’ll want to pay a mechanic $200 to perform a pre-purchase inspection before buying any used vehicle (or during the return window).

By definition, a used vehicle will always have more wear and tear than a new one. The leather interior might be fading in places, the engine may have lost some horsepower, and the brakes may need replacing sooner than later. A good pre-purchase inspection will help identify wear and tear and regular maintenance items that need attention (e.g., low tire tread), but you’ll still have to pay out of pocket to address them.

When you buy a used vehicle, you’ll typically inherit whatever factory warranty remains. If you buy a certified pre-owned (CPO) vehicle, you might get a short warranty attached lasting three to 24 months. But most used cars over three years old will come with no warranty protection whatsoever, so if you’d like insurance against factory defects, you might want to consider an extended auto warranty.

» LEARN: What is a manufacturer’s warranty?

Also, used cars typically cost more to maintain than new ones. For starters, a vehicle with 10,000 miles on it will need new brakes, tires and a tuneup 10,000 miles sooner than a brand-new car. Plus, as your vehicle ages, the cost and frequency of unplanned repairs go up.

“You have to assess the car’s dependability, long-term maintenance and upkeep costs,” Victor Kamanga, a car expert and YouTuber, told us. “Neglecting these factors might come back to haunt you.” That’s why it’s a good idea to consider the true cost of owning a car over the next five years, not just the sale price, since a car that’s affordable to buy may not be affordable to own.

Certified pre-owned vs. new

If you’re still not sure whether to buy new or used, would CPO split the difference? Does buying a car that’s (mostly) new — but at a pre-owned price — offer the best of both worlds?

Broadly speaking, CPO cars cost around $1,500 to $2,000 more than their pre-owned counterparts, and for that you get:

• A 191-point quality inspection guarantee (or similar)
• A short CPO warranty (usually around one year/12,000 miles)

If you’re more concerned about quality assurance, keep in mind that you can always hire an independent mechanic to perform a pre-purchase inspection for around $200. In some cases, their report may be even more thorough and unbiased than the dealership trying to sell you the car.

As for the extended warranty, the average three-year extended warranty costs only about $2,500.

» MORE: How much does an extended car warranty cost?

In summary, CPO vehicles aren’t inherently bad deals, especially if they’re only priced a few hundred dollars higher than pre-owned ones. Just know that there are economical ways to “certify” a vehicle yourself.