If you’re in the market for a vehicle, one of the first decisions you’ll face is whether to finance new or used. Both have real advantages—and real tradeoffs. But new vs. used car financing looks a little different in 2026 than it has in previous years, and it’s worth understanding the landscape before you apply for your next auto loan.
Here’s a breakdown of the pros and cons of each, plus what makes this year a bit of an unusual one for car buyers.
Why Choose a New Car?
Pros
The most obvious draw of a new car is access to the latest technology and safety features. From driver assistance systems to fuel efficiency improvements, a pre-owned vehicle simply can’t compete with whatever the newest model has to offer.
New cars also come with manufacturer warranties, which can cover repairs for the first several years of ownership—a meaningful savings that doesn’t always show up in the sticker price comparison.
Another advantage is lower interest rates. Because new cars hold their value longer, lenders take on less risk and typically offer lower APRs. People Driven Credit Union currently offers auto loan rates as low as 4.74%¹ APR—check our auto loan page for current rates.
¹APR = Annual Percentage Rate. Rates, terms, and conditions are subject to change. Loan approval, rate, term, and amount are subject to application, creditworthiness, underwriting, and membership eligibility. Other restrictions may apply.
Cons
New cars come with a higher purchase price, which means a larger loan, potentially longer term, and more total interest paid—even at those lower rates.
Depreciation is also steeper upfront. A new car can lose 20–30% of its value in the first year alone, which increases the risk of owing more on the loan than the car is worth—commonly known as being upside down.
Higher insurance premiums are another factor. New vehicles typically cost more to insure, adding to your monthly budget beyond just the loan payment.
Why Choose a Used Car?
Pros
The primary appeal of a used car is lower cost. A smaller loan means less total interest, even accounting for the higher rates that typically come with used vehicle financing.
Insurance is generally cheaper on a pre-owned vehicle, and depreciation is slower—most of the value drop has already happened before you buy it. That means your chances of going upside down on the loan are significantly reduced.
Cons
Used car loans typically carry higher interest rates, since older vehicles represent more risk to lenders. The gap varies depending on the age of the vehicle and the lender—People Driven Credit Union works to keep that spread as competitive as possible for members.
Manufacturer warranties are usually gone by the time a car reaches the used market. Extended warranties exist, but they add to the purchase price and close the gap between new and used costs.
Maintenance is the biggest wildcard. Older parts and accumulated wear mean a used car is more likely to need repairs sooner. A pre-purchase inspection can help, but some risk is unavoidable.
What Makes 2026 Different
In most years, a used car offers better overall financial value. 2026 is a bit of an exception.
The used-car market has expanded significantly, with online car-buying platforms driving up competition—and prices. To build inventory a couple of years ago, many of these outlets offered strong deals to sellers; now they’re charging more to recoup those costs. That pricing pressure has also slowed the depreciation rate on new cars, narrowing one of the traditional advantages of buying used.
On the new car side, manufacturers and dealerships have responded with creative incentives—competitive rates, rebates, and discounts—to attract buyers. And for those considering an electric vehicle, certain new EV purchases may qualify for federal or state tax credits, depending on income and other factors.
The bottom line: a used car still typically requires less upfront, but the gap between new and used has narrowed enough in 2026 that a new vehicle may be a better deal than it looks.
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How to Apply for an Auto Loan at People Driven Credit Union
Whether you go new or used, start by getting a clear picture of your budget. Factor in fuel, insurance, and likely maintenance costs—not just the monthly loan payment. Think about your down payment, including any trade-in value from your current vehicle, and consider how different term lengths affect what you’ll pay over time.
When you’re ready, you can apply online in minutes. You’ll need a valid ID, proof of income, employment information, vehicle details if you’ve already chosen one, and proof of insurance.
Frequently Asked Questions About Auto Loans
Your credit score is one of the main factors lenders use to determine your interest rate and loan terms. Higher scores generally mean lower rates; lower scores may mean higher ones. If your credit isn’t where you’d like it, it’s worth asking about options—People Driven Credit Union reviews the full picture, not just the number.
Not always, but it’s usually a smart move. A down payment reduces the amount you’re borrowing, which lowers your monthly payments and the total interest you’ll pay. People Driven Credit Union offers 100% financing on new cars (5 years old or newer). For used cars older than 5 years, we’ll finance up to 80% of the vehicle’s value.
The Loan Rate Discount takes 0.25% APR off your rate when you set up AutoPay from a People Driven Credit Union checking or savings account. That discount is already included in the “as low as” rate you see advertised. To enroll, call us at 248-263-4100 and a representative will get you set up.
People Driven Credit Union auto loan terms range from 12 months to 96 months. Longer terms mean lower monthly payments, but you’ll pay more in total interest over the life of the loan—worth running the numbers before you decide.
Yes. People Driven Credit Union members can pay off an auto loan at any time with no prepayment penalty.
