Buying & Selling

New or three years old: the money

Same model, same driver, same five years. One buyer takes it off the truck; the other waits for it to come back off a lease. Here is what each year costs, line by line.

Budget Pilot · September 28, 2026 · 4 min read

Picture two buyers. They are a composite, built for the arithmetic rather than drawn from anyone real. Both want the same midsize model and both will keep it five years. One buys it new. The other buys the same model at three years old, a common age for cars returning from leases. Each puts $5,000 down and borrows the rest over 60 months at the same illustrative 7% APR, so the only real difference between them is the age of the car.

Buyer A: new

Price: $36,000
Down payment: $5,000
Borrowed: $31,000
Payment, 60 mo at 7%: $613.84
Car's age at the end: 5 years

Buyer B: three years old

Price: $25,000
Down payment: $5,000
Borrowed: $20,000
Payment, 60 mo at 7%: $396.02
Car's age at the end: 8 years

Everything that follows rests on assumptions, and they are stated plainly so you can swap in your own. The resale values, repair costs and insurance premiums below are invented round numbers chosen to be plausible, not averages from any source. Sales tax and registration are left out because they vary by state; they would add more to the new car, since it costs more.

The ledger

Each year's cost is what the car truly cost that year: the value it lost, the interest paid, maintenance and repairs, and insurance. Loan principal is not a cost here. It is the purchase itself being paid for, and the purchase is already counted, year by year, as depreciation.

Year by year, illustrative. Gap = Buyer A's cost minus Buyer B's.
Year	A: new	B: 3 yrs old	Gap this year	Running gap
1	$10,200	$6,190	+$4,010	$4,010
2	$7,412	$5,940	+$1,472	$5,482
3	$6,596	$5,872	+$724	$6,206
4	$5,850	$6,284	−$434	$5,772
5	$5,072	$6,275	−$1,203	$4,569
Total	$35,130	$30,561	+$4,569

Over five years, in this example, the new car costs $4,569 more to own, a little over $900 a year. But look at the shape of the gap rather than its total. It opens wide in year one, narrows every year after, and reverses in years four and five, when the older car is the more expensive one to keep. The new car's cost is front-loaded; the used car's is spread out and slowly rising.

Where each year's number comes from

Line detail, illustrative. Interest is from a standard amortization, rounded to the dollar.
Line	Y1	Y2	Y3	Y4	Y5	Total
Buyer A, new
Value lost	6,000	3,500	3,000	2,500	2,000	17,000
Interest	2,000	1,612	1,196	750	272	5,830
Upkeep	300	400	500	700	900	2,800
Insurance	1,900	1,900	1,900	1,900	1,900	9,500
Year total	10,200	7,412	6,596	5,850	5,072	35,130
Buyer B, three years old
Value lost	2,500	2,300	2,200	3,000	3,000	13,000
Interest	1,290	1,040	772	484	175	3,761
Upkeep	700	900	1,200	1,100	1,400	5,300
Insurance	1,700	1,700	1,700	1,700	1,700	8,500
Year total	6,190	5,940	5,872	6,284	6,275	30,561

Value lost. The new car is assumed to go from $36,000 to $19,000 over the five years; the three-year-old one from $25,000 to $12,000. The first year of the new car is the single largest line in either ledger, which is the familiar argument for letting someone else own a car's first years. The older car's losses are smaller but steadier, and in this example they tick up late, when its age starts to show in its price. Why that happens is covered in depreciation, the bill that never arrives.

Interest. Borrowing $11,000 more costs Buyer A $2,069 more in interest over the loan ($5,830 against $3,761). Here both loans are assumed to carry the same rate. In practice, lenders often price new and used car loans differently, and the gap can go either way, so check real offers for both before relying on this line.

Upkeep. The new car starts with little beyond oil changes and has a factory warranty through the early years. Buyer B's car passes out of its original warranty during ownership and meets its first round of tires, brakes and larger services sooner. These are assumed figures, and a certified pre-owned car with its own warranty would shift them.

Insurance. A newer, pricier car usually costs more to insure against physical damage, and a lender may require that coverage while the loan is open. The $200 a year difference here is a placeholder. Get real quotes for both specific cars from your insurer; the answer depends on the model, your record and where you live.

Reading the bottom line honestly

Three things the totals do not show. First, the monthly outlay: Buyer A pays $217.82 more every month for five years, which is a cash-flow question as much as a cost one. Second, what each buyer holds at the end: a five-year-old car worth $19,000 against an eight-year-old one worth $12,000. That value difference is already counted in the ledger, but the newer car will also be cheaper to run for the next few years, which the ledger does not reach. Third, risk. The older car's years four and five are the most uncertain numbers on the page. A lucky owner spends less than shown; an unlucky one, much more.

So the ledger does not declare a winner. What it does is give a price to a preference: in this example, about $900 a year buys the new car's warranty, its full history and its lower repair risk. Some people find that a fair price for certainty. Others would rather keep the money and accept the bumps. Run the ledger with your own numbers, the two real prices, two real insurance quotes, two real loan offers, and you will know which kind of buyer you are.