New vs Used Car Calculator
How It Works
This new vs used car calculator uses established formulas to provide accurate results.
The basic rule:
- Total Cost = Purchase Price + Interest Paid + Insurance + Maintenance + Fuel - Residual Value
- New Car Depreciation: Year 1 = 20%, Year 2 = 15%, Year 3 = 12%, Year 4 = 10%, Year 5 = 9%
- Insurance: New = 4.5% of price/year, Used = 4.0% of price/year
- Loan Payment = P * [r(1+r)^n] / [(1+r)^n - 1] with 10% down, 60-month term
Results are estimates. Consult a professional for critical decisions.
Frequently Asked Questions
How is depreciation calculated for new vs used cars?
New cars lose about 20% in year 1, then 15%, 12%, 10%, and 9% in subsequent years. A 3-year-old used car has already absorbed the steepest depreciation, losing roughly 12% in its first owned year and declining more gradually. These are industry averages from depreciation studies.
Why is the used car loan rate higher?
Used car loan rates are typically 1-2% higher than new car rates because lenders see used vehicles as higher risk. The calculator adds 1.5% to your new car rate for the used car loan. Both assume a 10% down payment and 5-year loan term.
What maintenance costs are included?
New cars start around $300/year for basic maintenance and gradually increase as the warranty expires. Used cars start higher (~$700/year) since they are already out of the bumper-to-bumper warranty period and need more frequent repairs.
Does this include registration and sales tax?
The calculator focuses on the major cost categories: purchase price, depreciation, financing, insurance, maintenance, and fuel. Registration and sales tax vary significantly by state but would generally favor the lower-priced used car.