According to the latest Federal Reserve data, new car loan rates typically range from 2% to 5%, as banks consider new vehicles lower-risk investments. Used car loans generally carry rates between 5% and 8%, with rates potentially exceeding 10% for vehicles over 5 years old. On a $20,000 loan, this difference could mean saving $500-$1,000 in interest on a new car. Want to learn how to reduce interest costs through early payments? Check out our article on 5 Smart Money-Saving Tricks.
New cars often support long-term loans of 60 - 84 months. While the monthly payment pressure is relatively small, the total interest will increase. The loan term for used cars is usually limited to 36 - 60 months. Although the total interest is reduced, the monthly payment increases by 30% - 50%. Choosing a short-term loan for a used car requires having a sufficient budget.
Kelley Blue Book data shows that new cars depreciate by up to 20% in their first year. After three years, they retain about 50% of their original value. Used cars at the 5-year mark typically stabilize at 30-40% of their original value, with some classic models potentially appreciating. For insights on choosing the optimal loan package, see our guide on Smart Ways to Choose Auto Loans.
New cars enjoy a 3-year/36,000-mile factory warranty that covers core components such as the engine and transmission. When the used car loan does not include a warranty, the annual maintenance budget needs to be increased by $800 - $1,200. The replacement frequency of wear parts such as tires and brake pads is higher.
The total cost of a $30,000 new car over five years is approximately $37,000 (including interest and maintenance). The total cost of a $15,000 used car over five years may reach $23,000. For vehicles with a high maintenance rate, the cost may be approaching that of a new car.
Log in to carpayoffcalculator.xyz and enter vehicle price, loan term, and interest rate parameters. The system will automatically generate a comparison curve of the total costs of new and used cars. Adjust the down payment ratio and repayment frequency to see the interest difference and monthly payment changes of different plans in real-time.