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HoldingCost

New vs used vehicle

The true cost of new vs used isn't the sticker price — it's depreciation, warranty savings, and maintenance over your ownership period. See which gives better value with your numbers.

Calculator vehicles

Logic updated April 2026

This calculator compares the total cost of ownership of buying new versus buying a used vehicle of the same model over the same ownership period. It accounts for purchase price, financing, annual insurance and maintenance, and the depreciation hit each option absorbs. The output is a side-by-side total cost and a recommendation on which is the better value.

How this is calculated

Formula 

For each path: residual = price × (1 − depreciationRate)^ownershipYears ; totalCost = purchase + financing + cumulative(insurance + maintenance) − residual

Step-by-step

  1. For each path, apply declining-balance depreciation: residual at year N = price × (1 − rate)^N
  2. Sum cumulative annual costs over the ownership period: insurance + maintenance
  3. For new vehicles, treat maintenance as zero during the warranty period and start counting from the first post-warranty year
  4. Add precomputed total finance interest, amortised evenly across ownership years
  5. Total cost = purchase price + total finance interest + cumulative annual costs − residual value at end of period
  6. Compare the two totals; the lower-cost option is the better value
Rounding mode
ROUND_HALF_UP
Precision
20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
Logic last reviewed

Assumptions & limitations

What this calculator assumes

  • Insurance, maintenance, and depreciation rates are held constant for the ownership period
  • Depreciation uses a declining-balance model — residual at year N = price × (1 − rate)^N
  • Maintenance for the new vehicle is treated as zero during the warranty period
  • Financing cost is provided as a precomputed total interest figure and amortised evenly across the ownership period
  • Resale value at the end of ownership = purchase price × (1 − depreciation rate)^ownershipYears
  • Total cost = purchase + financing + cumulative running costs − resale value
  • No taxes, registration, or fuel costs are modelled — the calculator isolates the new-vs-used decision

What this calculator doesn’t account for

  • Doesn't include fuel costs (which are equal for the same model anyway)
  • Doesn't model unexpected major repairs that may favour the new vehicle
  • Doesn't factor in extended-warranty purchase costs
  • Doesn't include opportunity cost of capital tied up in the vehicle
  • Doesn't model used-vehicle pre-purchase inspection or refurbishment costs

Worked example

A buyer compares a $40,000 new car (with $5,000 finance interest, 3-year warranty, $1,200/year insurance, $300/year maintenance during warranty) vs the same model 3 years old at $24,000 ($3,000 finance interest, $1,000 insurance, $1,200/year maintenance), both held 5 years, depreciating 12%/year.

Input Value
New: price / interest / insurance / maint / warranty $40,000 / $5,000 / $1,200 / $300 / 3 years
Used (3y): price / interest / insurance / maint $24,000 / $3,000 / $1,000 / $1,200
Ownership / depreciation rate 5 years / 12%

New total cost: ~$30,400 — Used total cost: ~$22,000 — Used wins by ~$8,400

New: residual $40k × 0.88^5 = $21,100. Cumulative insurance: $6,000. Maintenance: $0 × 3 + $300 × 2 = $600. Total: $40k + $5k - $21.1k + $6k + $0.6k = $30,500. Used: residual $24k × 0.88^5 = $12,660. Insurance: $5,000. Maintenance: $6,000. Total: $24k + $3k - $12.7k + $5k + $6k = $25,300. Net difference: ~$5,200 — used wins. The depreciation curve flattens after the new-car drop, so the used vehicle absorbs less dollar depreciation despite the same percentage rate.

Frequently asked questions

How much do you save buying used?

Typically $5,000–$15,000 over a 5-year ownership compared to the same-model new car. The savings come mainly from skipping the steepest first-year depreciation hit (15–25% on most new cars). The trade-off is higher maintenance once any warranty has expired, and a slightly older driving experience. For mainstream models, used at 2–4 years old is usually the sweet spot.

What is the depreciation hit on a new car?

Most new cars lose 15–25% of value the moment they leave the lot, plus another 10–15% by the end of year 1 — a 25–40% combined drop in the first year alone. Buying a 1-year-old example skips this initial drop. Buying at 3 years old captures most of it; buying at 5+ years buys into a vehicle that has already shed most of its premium and is now valued primarily on condition.

Are maintenance costs higher on used cars?

Yes — typically 2–4× higher per year once the manufacturer warranty expires. A new car under warranty might run $200/year of maintenance; the same model out of warranty often costs $800–$1,500/year. Even so, the maintenance increase rarely offsets the purchase-price saving — used wins on total cost in most realistic scenarios. Pre-purchase inspection is essential to avoid a used-car lemon.

What is the sweet spot age for a used car?

Most cost analyses point to 2–4 years old as the optimum: the steepest depreciation has happened, manufacturer warranty may have years remaining, the vehicle's reliability is well-documented, and second-hand markets are deep. Vehicles 5+ years old start incurring meaningful out-of-warranty repair costs; vehicles under 2 years old haven't shed enough depreciation to justify the price premium.

Should I buy new for reliability?

Modern vehicles are remarkably reliable for the first 100,000–150,000 km regardless of who buys them — the reliability case for new is weaker than it used to be. A well-maintained 3-year-old car with full service records is statistically very similar to a new car for the first few years of ownership, at substantially lower cost. The reliability case for new applies more to enthusiast vehicles, very high-tech models, or cars used in commercial operations.

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