A story recently published on USA Today confirms what we pretty much all suspected: US auto loan debt is at a record high, they’re repossessing cars out the wazoo, and Americans are routinely buying more car than we can afford. And no, it’s not just because we’re buying fully-loaded Tacomas. The fact is that auto prices have been spiraling out of control at the same time as wages have stagnated, unemployment has risen, and the cost of living has got higher than ever. For many of us, cars that would have been considered a smart buy in pre-pandemic times are starting to look like a big financial burden in 2025.
When it comes to facing hard times, the only thing any of us can really do in the short term is try to save a buck wherever we can. We eat the off-brand potato chips, we cancel the streaming subscriptions we’re not using, and, unless you’ve already got something that’s totally paid off, we buy a cheaper car. But, before you go trading that full-size SUV in for a used Nissan Sentra, it’s worth considering what you’re actually saving, and if a used car really makes more sense than an affordable new model.
A report from the Consumer Federation of America states the following:
“Delinquencies, defaults, and repossessions have shot up in recent years and look alarmingly similar to trends that were apparent before the Great Recession.”
The CFA points to the average vehicle selling for nearly $50,000, with around 20% of new car buyers paying at least $1,000 each month for their loans. The same percentage of new car buyers are holding onto a seven-year financing plan. The CFA sent the report to Congress on September 10th, asking the government to step in and do something about “exploitative practices,” including interest-rate kickbacks, which see dealers and lenders conspiring to “secretly inflate interest rates” in order to share the profits from consumer overpayment.
All told, Americans currently owe more than $1.66 trillion in auto debt, and, according to the CFA, this constitutes an economic crisis, just as “the Consumer Financial Protection Bureau and the Federal Trade Commission have taken significant steps back” in regards to oversight and enforcement of predatory business practices.
“I’ll just buy used” sounds like a great idea, but it might not be that simple. The higher cost of buying a new vehicle has had a ripple effect on used cars. According to the CFA, used car prices are up 6.3% from June 2024 to June 2025. So we need to actually take a look at the average cost of ownership between new and used cars. Let’s go over some key points.
Obviously, cost of ownership varies wildly from car to car, whether we’re talking new or used. So let’s take the cheapest new car on the market today, which is – according to Kelley Blue Book – the 2025 Nissan Versa, which starts at $17,190, and compare that to a similarly priced five-year-old used car in the compact segment, that being the 2021 Honda Civic. Kelley Blue Book lists the Civic having a fair purchase price of $17,841 for the LX Sedan.
Expense
2025 Nissan Versa
2021 Honda Civic
Annual Loan Payments
$2,441
$2,697
Annual Fuel Expenses
$1,350
$1,250
Annual Maintenance Costs
$456
$368
First-Year Depreciation
$4,108
$267
First-Year Expenses
$8,355
$4,582
For our monthly loan payments, we’re assuming a 60-month loan term at 5% with a $10,000 down payment, 6% sales tax, and we’re including an estimated $3,000 for registration, titling, and other costs. Our fuel expenses come from Fueleconomy.gov, assuming 15,000 miles each year. Your mileage will definitely vary. These calculations are just to give us some numbers to work with.
At a glance, the biggest factor here is depreciation. Where a brand-new Versa loses 23.9% of its value in the first year, a five-year-old Honda Civic will only lose 1.5% of its value over your first year with it.
Nissan’s standard warranty plan includes three years of basic coverage, five years of powertrain coverage, five years of corrosion protection, and three years of roadside assistance. Those expenses will come out of your pocket in a five-year-old used Civic, but when your car only costs $368 to repair each year, that’s not really a dealbreaker.
The bottom line is that, even when a used car has a slightly higher sticker price, depreciation alone means that you’re paying less for a five-year-old used car than you are for a brand-new model, and that doesn’t just apply to budget-priced models, as the depreciation obviously scales with the value of the car.
This is just for cars dating back five years, though. That is, the kind of model you’re likely to find on a licensed dealer’s lot. If we’re talking about the whole used car market, there are too many variables to really make an accurate comparison, as “used cars” covers everything from a one-year-old model with 2,000 miles on the odometer, to a mid-century classic that still runs like new after decades of fastidious maintenance, to a 30-year-old beater that you’re just driving until the transmission gives out, and you can scrap it.
What do we have to do to get you into a like-new Ford Ranger with only a few cigarette burns in the seats, and a smell that’s barely noticeable when you roll the windows down? But seriously, we’ve got some favorites that we’re happy to recommend if you’re after a reliable used model, or an affordable new vehicle.
On our list of the best cars priced under $25,000, we ranked the $20,400 Chevrolet Trax in the top five. This is a 137-hp compact crossover with a six-speed automatic transmission (a real one, not a CVT), and a pleasant drive. Not an exciting drive, but a pleasant one. What we’re saying is you could do a lot worse for just over $20,000.
As far as used models go, we’ll happily recommend the third-gen Toyota Prius as a car that can easily reach 300,000 miles or better with adequate maintenance. A 2014 Prius Two will run you just $8,282, according to Kelley Blue Book. If hybrids aren’t your thing, you really can’t go wrong with pretty much any Honda Civic, although early-2000s models earn the lion’s share of reports on CarComplaints.
There’s no telling if we can actually count on Congress to do something about spiraling ownership costs, but we can at least shop smart.
Sources: AAA, CarEdge, Calculator.net, Kelley Blue Book.
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