Deciding between a new or used car is one of the biggest choices you’ll face when shopping for a vehicle. Each comes with its own set of advantages and trade-offs, especially when it comes to financing. With 2024 bringing its own economic factors and interest rate trends, figuring out which option will save you the most money has become more important than ever.

In this article, we’ll break down the key differences between new and used car loans in 2024, including interest rates, overall costs, and other financial considerations. By the end, you’ll have a clearer idea of which option best suits your budget and lifestyle.

The Basics: New vs. Used Car Loans

When choosing between a new or used car, one of the biggest financial factors is the loan that comes with it. Personal Car loans for new vehicles often have lower interest rates because new cars are seen as less risky for lenders. However, new cars also tend to cost more upfront, meaning a higher loan amount.

On the other hand, loans for used cars typically come with higher interest rates. Lenders consider used cars riskier because they’ve already depreciated and may require more maintenance. Still, the lower purchase price of a used car might mean taking out a smaller loan overall.

Before diving into the specifics, let’s take a closer look at what’s happening with car loan interest rates in 2024.

2024 Car Loan Interest Rates: What to Expect

As we step into 2024, car loan interest rates are influenced by several economic factors. The Reserve Bank of Australia (RBA) increased interest rates throughout 2023 to curb inflation, which directly impacted borrowing costs for everything from mortgages to car loans. Fortunately, 2024 is predicted to be a more stable year for interest rates, with potential for slight decreases in the second half of the year.

For new car loans, you can generally expect to see lower interest rates than for used car loans. Lenders offer more favorable terms for new cars because they hold their value better and have fewer unknowns. Used car loans, while still affordable, often come with higher rates to offset the perceived risk of financing a pre-owned vehicle.

New Car Loans in 2024: What You Need to Know

1. Lower Interest Rates

One of the biggest advantages of choosing a new car in 2024 is the lower interest rate you’re likely to receive. Because new cars are considered safer investments for lenders, you’ll often see more favorable financing terms compared to used cars. Depending on your credit score and loan term, you might find rates as low as 6-7% for new car loans.

If your credit is strong, this is where you can really benefit. A lower interest rate means smaller monthly payments and less paid in interest over the life of the loan.

2. Higher Loan Amounts

The downside of financing a new car is the cost. New cars come with higher price tags, and while you may qualify for a lower interest rate, you’ll still need to borrow more money. The larger loan amount can translate into higher monthly payments, even with a lower interest rate.

3. Depreciation

It’s no secret that new cars lose value quickly. In fact, the moment you drive a new car off the lot, it begins to depreciate. This rapid depreciation is important to keep in mind when financing a new vehicle because you could end up owing more on the car than it’s worth—a situation known as being “upside down” on your loan. If you plan to trade in or sell your car in the near future, this could result in a financial loss.

Used Car Loans in 2024: What to Expect

1. Higher Interest Rates

In 2024, used car loans are still expected to come with slightly higher interest rates than new car loans. The difference typically ranges from 1-3% more than what you’d pay for a new vehicle. For example, if the average rate for a new car loan is 7%, you might see rates of 8-10% for a used car loan.

While this might seem like a disadvantage, it’s important to remember that the total loan amount is usually smaller with a used car. This can offset the impact of a higher interest rate.

2. Lower Purchase Price

The biggest benefit of buying a used car is the lower cost. Even though you’ll pay a bit more in interest, the smaller loan amount can lead to lower monthly payments and potentially paying off the loan sooner. Additionally, the upfront costs like registration and insurance are often lower with used cars, giving your budget some breathing room.

3. Slower Depreciation

Unlike new cars, used cars don’t depreciate as rapidly. The biggest hit to a car’s value happens in its first few years, so when you buy a used car, someone else has already absorbed that initial depreciation. This means your used car will hold its value better over the first few years you own it, which can be a financial advantage if you plan to sell or trade in the car later.

Which Option Saves You More Money in 2024?

Now that we’ve covered the basics, let’s get to the question at hand: which option saves you more money in 2024—buying new or used?

1. Upfront Costs

In terms of upfront costs, used cars are the clear winner. With a lower purchase price, you can take out a smaller loan, which means lower monthly payments. You’ll also pay less in registration fees and insurance costs, both of which are calculated based on the car’s value.

2. Total Cost of Ownership

When looking at the total cost of ownership over the life of the loan, the picture is a bit more nuanced. A new car may come with a lower interest rate, but its higher price tag and rapid depreciation can offset some of those savings. Meanwhile, a used car’s higher interest rate may be balanced out by the lower purchase price and slower depreciation.

To compare the two, it’s important to factor in how long you plan to keep the car. If you’re someone who likes to trade in your car every few years, a used car might make more financial sense since it will hold its value better and you’ll owe less on your loan. On the other hand, if you plan to keep your car for a long time, a new car could be a good investment, especially with lower interest rates and warranties that cover maintenance costs.

3. Loan Terms and Refinancing

Another factor to consider is the loan term. A longer loan term might make a new car’s higher price tag more manageable with lower monthly payments. However, it also means you’ll pay more in interest over the life of the loan. On the flip side, a shorter loan term for a used car might come with slightly higher monthly payments, but you’ll pay off the loan faster and pay less in interest overall.

If you’re concerned about high rates, you can always explore refinancing your car loan later in the year when rates may decrease slightly. This is an option whether you choose new or used, and it can save you money in the long run.

New or Used in 2024?

Ultimately, the decision between a new or used car loan in 2024 comes down to your personal financial situation and priorities. If securing a lower interest rate and having the latest model is important to you, then a new car might be the better option. On the other hand, if saving upfront and minimizing depreciation is your goal, a used car could provide more value over time.

Whichever route you choose, take the time to shop around, compare rates, and factor in the total cost of ownership. By doing so, you’ll be in a stronger position to make the best decision for your finances in 2024. For personalized assistance and expert guidance on automotive finance, don’t hesitate to contact our team. We’re here to help you navigate your options and secure the best loan tailored to your needs. Make your car financing journey smooth and successful—reach out to us today!

FAQs

Is it Better to Buy a New or Used Car in 2024?

Choosing between a new or used car in 2024 depends on what matters most to you. New cars have the latest features and usually come with a warranty. They also need less maintenance at first. However, they lose value quickly. Used cars are often cheaper and keep their value better. But they might need more repairs and may not have a warranty. Think about your budget, the condition of the car, and how you plan to use it before you decide.

Is it Easier to Finance a New or Used Car with Bad Credit?

Getting a loan for a new car with bad credit can be tough. Lenders usually have stricter rules. However, new cars often have good deals from manufacturers. On the other hand, used cars are usually cheaper, which might help you get a loan more easily. But remember, the interest rates can be higher. It’s important to compare your options. You might also want to work with lenders that focus on loans for people with bad credit.

5 Disadvantages of Buying a New Car

• Depreciation: New cars lose value quickly, often up to 20% in the first year.
• Higher Costs: New cars come with a higher purchase price and potentially higher insurance premiums.
• Additional Fees: New cars may have extra costs such as dealer fees, taxes, and registration.
• Potential for Initial Issues: Despite warranties, new cars can have unforeseen problems.
• Rapid Technological Obsolescence: New features and models can quickly make your car seem outdated.

If you need expert advice, don’t hesitate to reach out to us. We’re here to guide you through every step. Contact Us  and take charge of your financial future today! 

✉️ info@wealthyyou.com.au
☎️ (02) 7900 3288 

You can also connect with us on social media: Facebook, Twitter, Instagram, LinkedIn