Here's the financial impact of the decision to buy a new car vs a 2-3 year old used car, modeled over 10 years.

New car: $38,000 purchase price, 5-year loan at 7.5% APR. Monthly payment: $760. Total cost of loan: $45,600. After 5 years, car is worth approximately $18,000. Own the car outright for years 6-10.

Used car (2 years old): $26,000 purchase price (represents typical 20-25% depreciation already absorbed by first owner), 3-year loan at 6.9% APR. Monthly payment: $804 for 3 years, then paid off. Total cost of loan: $28,944. After 3 years, car worth approximately $16,000.

Net cost to drive for 10 years:

• New car: $45,600 loan + $8,000 in additional insurance premium difference over 5 years = $53,600
• Used car: $28,944 loan + lower insurance premiums = $32,000

Difference: approximately $21,000 over 10 years, before accounting for the opportunity cost of the cash difference invested.

The depreciation curve is steepest in the first 2-3 years. Buying a car just past that curve captures most of the reliability of a newer vehicle at significantly lower cost.