📊 Buying New vs. Used Car Calculator

Deciding between a brand new car and a reliable older model is one of the biggest financial choices you make. Financing a new vehicle feels normal, but the massive hit of depreciation and high interest rates destroys wealth fast.

This calculator compares the true three-year sunk cost of financing a new ride versus paying cash for an older model so you can see exactly how much money you throw away.

The biggest chunks of a new car's cost are depreciation and financing. As Juan Carlos LTO puts it, as of the making of this video the average cost of a new car in 2023 is about $48,000 and is expected to break the $50,000 mark sometime this year.

Because the median bank account balance is just $5,300, financing is the default. Combined with a multi-year loan, these sunk costs add up quickly. As Juan Carlos LTO notes, in total an average new car would have cost you $20,745 in the first three years of ownership in depreciation and financing alone.

Buying an older vehicle for cash avoids high financing charges and minimizes your depreciation hit. However, an 11-year-old car is absolutely a gamble. You must factor in a healthy annual budget for maintenance and unexpected repairs to keep it on the road.

As Juan Carlos LTO explains, driving an old car is a gamble and you can improve your odds in your favor by picking a car from a brand with a good reputation of longevity such as a Toyota or a Honda. Ultimately, an old car gives you three years of relative reliability for a fraction of the cost.