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Buying a Used Car

By: Financial Hotline
Summer 2025 (Vol. 43, No. 2)

Used cars offer a lower initial price, slower depreciation and cheaper insurance rates. A new car loses a significant portion of its value the moment you drive it off the lot, and the depreciation continues steeply in the first few years.

In general, the first year takes the biggest depreciation hit. A new car depreciates 20% the moment you drive it off the lot. This means if you paid $30,000 for your new car, it is worth $22,500–$24,000 within the first year.

By year three, your car will be worth around 50% of it’s value new. So, a three year old car that cost $30,000 brand new would be worth around $15,000. For the same car at five years, the value drops to around 40% of the original cost.

When you are purchasing used it pays to:

Ask for the vehicle history report. These reports pull information from multiple sources including the Department of Motor Vehicles, insurance companies and repair shops. Companies like CarFax and Bumper, give you important information including prior ownership, title status, accidents, mileage and even salvage or flood history.

Check the maintenance history. Be cautious of vehicles with sparse or incomplete records.

Do a pre-purchase test drive and inspection. You can usually get a mechanic’s checkup before buying for around $150.

Research all additional costs for your vehicles. Get an insurance estimate for the model you are buying and check out cost for typical repairs. Luxury cars can be considerably more expensive to maintain and repair.

Look for Certified Pre-Owned (CPO). CPO also offers warranty coverage.

Research Common Issues. Some models and specific years have a record of known problems and inefficiencies.

Tips to maximizing resell value include:

  • Choosing a brand with high resale value such as Toyota, Honda, Subaru and Jeep Wrangler.

  • Avoid luxury cars that tend to lose value the fastest. If your heart is set on a high end model, you may get the best deal by leasing.

  • Keep mileage as low as possible. Higher miles equals faster depreciation.

  • Maintain all service records. Well-documented cars sell for more.

Of course, other factors would come into play such as how well the vehicle was maintained, accident history, reliability, etc. Here are some examples of reliable used cars according to Consumer reports and other trusted sources:

Get Pre-approved for a car loan. If you are planning to finance, shopping for a loan before you start your vehicle search will allow you to sort out any credit issues beforehand. Banks/Credit Unions often offer better rates than dealerships. Compare offers from multiple lenders like Bankrate, Capital One and your local credit unions. Having a pre-approval also gives you leverage— dealers may match or beat your rate.

Don’t be tempted to buy expensive extras like extended warranties or gap insurance. If you are purchasing a reliable vehicle, these warranties usually have many exclusions and most cost more than any repairs you will have during the coverage period.

Consider a compromise. If your heart is set on a brand-new vehicle, but you still want to be financially frugal, buy a one- to three-year-old “lightly used” car. It’s old enough to reveal any major problems with the model and you avoid the worst depreciation but still get modern features and remaining warranty. A good source of newer, low mileage vehicles is to purchase a 2-3 year-old off-lease CPO car from a reputable dealer.

Under $10,000
  • Toyota Corolla (2012-2016) – Legendary reliability, good fuel economy.
  • Honda Civic (2013-2015) – Strong engine, low maintenance costs.
  • Toyota Camry (2012-2015) – Roomy, smooth ride, durable.
  • Mazda3 (2014-2016) – Fun to drive, good fuel efficiency.
  • Honda Fit (2013-2015) – Surprisingly spacious, great MPG.
$10,000 - $20,000
  • Honda CR-V (2015-2018) – Spacious, efficient, comfortable.
  • Subaru Outback (2016-2018) – Great AWD, rugged but refined.
  • Lexus ES 350 (2015-2017) – Luxury sedan with Toyota reliability.
  • Mazda CX-5 (2016-2018) – Upscale interior, sporty handling.
$20,000 - $30,000
  • Toyota Highlander (2019-2020) – Dependable family SUV.
  • Honda Accord (2018-2020) – Roomy, refined, efficient.
  • Lexus RX 350 (2018-2020) – Luxury SUV with bulletproof reliability.
  • Subaru Forester (2019-2020) – Excellent safety, great visibility.
  • Toyota Tacoma (2018-2020) – Best midsize truck for longevity.