Car Blog

New vs Used vs Very Used Cars (What’s the Real Cost Difference?)

May 3, 2020

In this video post I’m going to compare the real life cost to own 6 popular vehicles over the useful lifespan of the vehicle (Honda Civic, Honda CR-V, Honda Odyssey, Ford Mustang, Jeep Wrangler, and Toyota Tacoma).

Most people understand that used cars cost less than new cars. I’ve made this video because that common knowledge isn’t particularly useful, and it isn’t always correct.

Using real life purchase and trade-in data I’m going to show you how the cost of owning a vehicle changes as the vehicle ages with more mileage. You’ll be better able to see the cost differences between buying a vehicle new, versus buying a 3 year old version, or a 7 year old version.

One of the these 6 vehicles was cheaper to buy new than used.

Before I dive into the numbers, I want to provide some quick context about budgeting. A well regarded financial expert like Dave Ramsey will be more than happy to remind you that new cars are for millionaires only. His advice is that the total cost of the cars in the household should not exceed 50% of household income.

The old rule of thumb for affordability (which has gone out the window this past decade) is that you should always put 20%, pay off the car in 4 years or less, and the monthly payment should not exceed 10% of your income. This is known as the 20/4/10 Rule. In general I think this is still a pretty good rule of thumb

My thoughts on affordability are a little less rigid though. I believe being able to afford a car is simply being able to pay off the car as quickly as it depreciates. As you will see in the examples in this video, cars do not all depreciate at the same rate or for the same relative amount. Some cars even appreciate.

If you want to learn more about affordability I cover how much car you can afford in more detail in a separate video on this channel. And as always I cover all things vehicle negotiation on this channel so if you’re looking to save time and money on your next new or used vehicle purchase I have all the videos here that you’ll need to do that as well.

In order to make these comparisons productive I’ve made the assumption that in each scenario, each vehicle is driven 15,000 miles per year.

I’ve also excluded a few variables for the purposes of making comparison simpler. You would still need to consider the depreciation of premium add-ons, sales tax & registration, and maintenance & repairs before making your next purchase: