A new federal deduction allows you to deduct up to $10,000 in interest on loans for new vehicles assembled in the U.S. for tax years 2025–2028. When to Consider Other Options
New cars can lose 20–30% of their value in the first two to three years. If you plan to sell within five years, buying a 3–5 year-old used car—which has already absorbed this hit—might be better.
In 2026, new car loans average around 7% APR , while used car rates sit much higher at roughly 12% . Well-qualified buyers can even find 0% APR offers from some automakers to move stagnant inventory. should you buy a new car
To stay financially healthy, put at least 20% down , finance for no more than 4 years , and keep total monthly costs under 10% of your gross income.
Federal tax credits for EVs were killed in late 2025, making new EVs significantly more expensive. Leasing an EV may be safer due to rapid technology changes and faster depreciation. A new federal deduction allows you to deduct
Never negotiate based on monthly payments. Focus strictly on the total price including taxes and fees to avoid hidden dealership markups.
New cars include full manufacturer warranties, providing peace of mind against expensive repairs. Conversely, five-year-old cars can cost owners $800–$1,000 annually in maintenance. If you plan to sell within five years,
New cars typically have higher insurance premiums and higher property taxes in certain states. Smart Buying Tips for 2026