Head to head
New Car Finance vs Used Car Finance: Which Is Cheaper?
Finance a new car or a used one — compared on rate, depreciation and total cost.
Used car finance usually has a lower total cost because the car is cheaper, but new car finance often carries a lower rate and sometimes a 0% deal.
Used car finance usually costs less overall because the car is cheaper, while new car finance often has a lower interest rate and sometimes 0% offers. Less to borrow on used; a better rate on new.
New cars depreciate fastest in the first years, so a nearly-new used car can give you most of the car for far less finance.
New vs used car finance at a glance
Used finance means borrowing less; new finance often means a lower rate. Depreciation hits new cars hardest in the early years.
A new car loses value quickest in its first three years, so you finance a price that drops fast. A used car has already taken that hit, so you borrow less — though the rate is often a touch higher to offset the lender's risk.
| New car finance | Used car finance | |
|---|---|---|
| Amount borrowed | Higher (full new price) | Lower (cheaper car) |
| Typical rate | Often lower, sometimes 0% | Usually a bit higher |
| Depreciation | Fastest in year 1–3 | Already taken the hit |
| Total cost | Higher (price + rate) | Usually lower |
| Best for | Latest model, 0% deals | Lowest total outlay |
Worked example: new vs used finance
A £20,000 new car on finance can cost about £23,695 in total on HP; a £14,000 used version of the same model borrows far less, even at a slightly higher rate.
The cheaper car usually wins on total cost; the lower rate (or a 0% deal) is what makes new finance competitive. Compare both on the used car finance calculator and the new car finance calculator.
Worked example
Who each option suits
Finance used for the lowest total outlay; finance new for the latest model, a lower rate or a 0% deal.
- Used car finance if: you want the lowest total cost, want to dodge the steepest depreciation, and don't need the very latest model.
- New car finance if: you want the newest car with a full warranty, can get a genuine 0% or low rate, and plan to keep it long enough to offset depreciation.
- A nearly-new car (1–3 years old) often blends most of both — modern car, lower price, gentler depreciation.
Work out your own numbers
Compare the amount borrowed and the rate side by side — the cheaper car often beats the lower rate.
Run the figures on the used car finance calculator and the new car finance calculator, then check each deal's true APR and interest. See it all on the car finance calculator.
Frequently asked
Is new or used car finance cheaper?
Why is the rate often lower on new car finance?
Does depreciation matter when financing a car?
Should I buy new or nearly-new on finance?
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