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New vs used car loans

Financing a new car and financing a used one are not the same. Here is how the numbers — and the risks — differ.

Interest rates

Used cars usually carry higher interest rates than new ones, because they are seen as riskier collateral. New cars sometimes come with promotional low-APR financing from manufacturers.

Depreciation

New cars lose value fastest in the first few years, so a small down payment can leave you "upside down" (owing more than the car is worth). Used cars have already taken that depreciation hit, so your equity position is often safer.

Total cost

Even with a slightly higher rate, a used car's lower price usually means a lower total cost and a smaller loan. Run both scenarios through the calculator to compare monthly payments and total interest.

Which is right for you?

• New — latest features, full warranty, possible promo financing, but faster depreciation.
• Used — lower price and slower depreciation, but usually higher rates and less warranty coverage.

General information, not financial advice.