What’s a Better Value in 2025, A New or Used Car? Experts Weigh In

by Justin Fischer | Last updated Jan 27, 2025 | Car Buying, New Cars, Used Cars

It’s a new year, yet the car market is presenting drivers with the same classic dilemma: should you buy new or used in 2025? This year, several factors are reshaping the debate, including depreciation trends, interest rates, and price shifts in both new and used car markets. Making the right choice requires a close look at your financial situation and ownership goals. We spoke to CarEdge Co-Founder and auto industry veteran Ray Shefska about how car buyers can make smart, financially-sound decisions in 2025’s market.

Here are some key considerations to help you determine whether buying new, buying used, or leasing makes the most sense for you. 

Buying New in 2025 – Financing Deals Versus Depreciation Risks

New cars are known for their steep depreciation, and in 2025, depreciation rates have returned to pre-pandemic levels. That means a new car can lose 20-30% of its value within the first two to three years of ownership. However, buying new has its advantages, too. Manufacturer incentives are sweetening the deal for buyers with attractive lease offers, low APR financing, and cash incentives that simply aren’t available for used car buyers. 

Here’s a look at the pros and cons of buying a new car in 2025.

Why Buy New in 2025?

• Incentives Galore: Automakers are offering competitive promotions to attract buyers, including 0% APR financing and cash-back deals. See this month’s best offers.
• Peace of Mind: New cars come with full warranties, the latest safety features, and no concerns about wear and tear from previous owners.
• Custom Orders: Buying new allows you to select the exact trim, color, and features you want. However, custom orders can come at an even higher price.

Drawbacks of Buying New:

• Higher Initial Cost: Even with incentives, new cars come with higher upfront prices compared to used options. The average new car price in 2025 is nearly $50,000.
• Depreciation Risk: If you plan to sell your car in less than five years, you’ll likely face a significant financial loss due to depreciation.

If you’re considering a new car but worry about depreciation, leasing may be a better option for you in 2025. It allows you to enjoy the benefits of driving new without the financial impact of resale value losses.

👉 Check out our FREE Guide to Leasing in 2025

Interest Rates Matter – New Cars Have Lower Rates

Interest rates are a defining factor in the new versus used car debate. While borrowing costs remain high in 2025, automakers are making it easier to finance new cars by offering low APR financing. Used car loans, on the other hand, often come with higher interest rates from banks and credit unions.

Why New Cars Win on Interest Rates:

• Lower APR Offers: Many manufacturers are advertising rates as low as 0% APR for new car buyers, helping you save thousands over the life of the loan.
• Better Loan Terms: Lenders tend to offer more favorable terms for new cars compared to used, including longer loan periods and lower down payment requirements.

In 2025, the average used car loan rate is about 14% APR, while new car loan rates average 9% APR. Used car loans typically come with interest rates about 5% higher than those for new vehicles. Over a five-year loan term, this can significantly increase the total cost of financing a used car. If monthly payments are a concern, financing a new car with low APR may actually make more financial sense. 

👉 However, NEVER negotiate monthly payments – always negotiate the Out-the-Door Price to avoid add-ons and ripoffs. 

See Every 0% APR Offer This Month

New Tools Make Negotiating Easier Than Ever

The days of guessing what to pay for a new car are over. In 2025, buyers have access to tools that provide insight into dealer pricing, invoice costs, and manufacturer incentives.

How to Save Big When Buying New:

• Use Dealer Invoice Pricing: CarEdge now offers Free Dealer Invoice Pricing, allowing you to see what the dealer pays for the car and giving you leverage in negotiations.
• Keep Up With Local Market Trends: A decade ago, car buyers didn’t have access to behind-the-scenes tools like CarEdge Pro. Now, any car buyer in America can see the ins and outs of their local car market for each make and model. Learn more about Pro.
• Compare Offers Across Dealers: With free online tools from CarEdge, you can easily master the art of negotiating. A big part of this is learning how to effectively cross-shop between dealerships. Always compare prices and incentives from multiple dealerships to ensure you’re getting the best deal.
• Leverage Manufacturer Incentives: Research available incentives to maximize your savings before heading to the dealership. We gather the best incentives in one spot for you.

These tools make it easier than ever to negotiate confidently and secure the best deal on a new car in 2025.

Used Car Prices Trending Downward, But Remain High

After years of record-breaking price hikes, used car prices are finally starting to decline. However, they remain elevated compared to historical norms, and deals can still be hard to come by without the right negotiating tools.

Why Consider Buying Used in 2025?

• Lower Upfront Costs: Used cars are more affordable than their new counterparts, making them a better choice for budget-conscious buyers. Saving $100 or more on monthly payments over five to six years really adds up! 
• Avoid Steep Depreciation: Buying a 3-5 year-old used car allows you to avoid the steepest depreciation period, saving you thousands. If you decide to sell in a few years, you won’t feel the heavy depreciation that a new car buyer in a similar situation would experience. 
• Used Cars Are Negotiable In 2025: As competitive new car incentives remain, fewer car shoppers are heading to the used car lots. A slump in demand is good news for those willing to negotiate used car prices. 

Challenges of Buying Used:

• Higher Interest Rates: As mentioned earlier, used car loans often come with higher APRs, which can offset some of the savings. In 2025, the average used car loan rate is nearly 14% APR.
• Limited Incentives: Unlike new cars, used vehicles don’t come with manufacturer promotions or warranties. However, you can get a fair deal on an extended warranty.
• Condition Concerns: Always get a pre-purchase inspection to avoid surprises with hidden issues.

Despite these challenges, buying used is still the go-to option for many drivers who prioritize affordability and don’t mind sacrificing the latest features.

Why a 3-5 Year-Old Used Car Could Be the Perfect Compromise in 2025

For many car buyers in 2025, a 3-5 year-old used car strikes the perfect balance between affordability, reliability, and long-term value. This “sweet spot” in the used car market offers significant benefits that make it a smart choice for budget-conscious drivers who don’t want to sacrifice quality or performance.

Here’s why a 3-5 year-old used car could be the ideal option for you:

Avoid Steep Depreciation

New cars typically lose 30-40% of their value within the first three years, making depreciation one of the biggest hidden costs of buying new. 

Lower Upfront Costs

Compared to buying new, 3-5 year-old used cars are significantly more affordable. The average used car price in 2025 is $25,571, nearly 50% lower than today’s average new car price.

Modern Features Without the Premium

A car that’s 3-5 years old still comes equipped with many of the features found in today’s new models, such as advanced safety systems and driver assistance. 

Remaining Warranty Coverage (Depending on Mileage)

A 3-5 year-old car is typically well within its prime and often covered by a portion of the manufacturer’s original powertrain warranty. If coverage is about to run out, get an Extended Warranty quote for peace of mind.

Better Financing Options Compared to Older Cars

While interest rates for used car loans are higher than those for new cars, lenders generally offer better rates for late-model used cars compared to older vehicles. This makes financing a 3-5 year-old car more manageable and less risky.

By choosing a 3-5 year-old used car, you get the best of both worlds: modern features at a lower price, and the ability to avoid the financial pitfalls of buying new. It’s a smart compromise for 2025 car buyers looking for value and reliability. To ensure you’re making a wise investment, always research market trends, request vehicle history reports, and schedule a pre-purchase inspection before buying any used car.

The Verdict: New or Used in 2025?

In 2025, the decision between buying new or used depends largely on your financial situation and long-term ownership goals.

When to Buy New:

• You plan to keep the car for 5+ years and want the latest features.
• You qualify for low APR financing and want predictable monthly payments.
• Manufacturer incentives significantly reduce the cost.
• To avoid depreciation altogether, consider leasing a new car.

When to Buy Used:

• You want to avoid rapid depreciation and pay less upfront.
• You’re willing to shop for 3-5 year-old vehicles in good condition.
• You don’t mind driving a car with fewer bells and whistles.
• You’re prepared to negotiate a great used car deal.

No matter which option you choose, doing your homework is key. Research market trends, compare deals, and always negotiate to get the best price possible.

CarEdge Can Help You Save

Navigating today’s car market doesn’t have to be stressful. With tools like the Research Hub, Free Dealer Invoice Pricing, and CarEdge Pro, you’ll have all the information you need to negotiate like a pro. Whether you’re shopping for new or used cars, we’ve got the resources to help you save thousands.

Ready for an expert to negotiate on your behalf? CarEdge Concierge is your perfect fit!

Start your car buying journey with confidence at CarEdge, where transparency meets savings.