A new car loses value fastest in its first years, so let the first owner absorb that drop. Shop for cars two to three years old that still have the factory warranty on the engine and transmission. Line up your loan first, since used-car loans usually carry higher rates than new-car loans.
The drop starts at the dealership. CARFAX estimates a new car typically loses more than 10% of its value in the first month you own it.
In Edmunds’ early-2026 data, the average three-year-old car was worth just 66% of its original sticker price, a five-year low. On a car that stickered at $45,000, that’s about $15,300 the first owner absorbed. From there to year five, CARFAX’s rule of thumb puts the loss at roughly 5% a year.
A two- or three-year-old car skips that costly stretch and often keeps factory coverage. Kelley Blue Book puts the typical basic warranty at three years or 36,000 miles. The typical powertrain warranty, which covers the engine, transmission, and axles, runs five years or 60,000 miles, so a two-year-old car may still carry both.
Supply is growing, too. Edmunds projects off-lease returns will rise 25.7% in 2026, many of them 2023 electric models, and calls used electric cars in particular standout deals.
Before you buy one:
- Confirm how much warranty is left and whether it transfers in full. Most do, but Hyundai and Kia cut their 10-year powertrain coverage to five years or 60,000 miles for second owners.
- Get preapproved for a loan. In Experian’s second-quarter 2026 data, used-car loans averaged 11.19% interest, versus 6.35% for new cars. On a $30,000, five-year loan at those averages, the gap adds about $70 a month.
- Compare your preapproved rate with any promotional financing on a new car of the same model.
- Pull a vehicle history report, and pay an independent mechanic to inspect the car before you sign.
Buy the car after its steepest years, then drive it through the slower ones.
Editorial & Advertiser Disclosure: The editorial content on this page is not provided, commissioned, reviewed, approved, or otherwise endorsed by any advertiser. Opinions expressed here are ours alone, not those of any advertiser. The offers that appear on this site are from companies that compensate us. That compensation may influence which products we cover and where and how they appear on a page – including the order in which they appear – but it does not influence our evaluations, ratings, or opinions. We do not include every company or offer available in the marketplace.
Related:
