The danger in buying new is getting “upside down” on the bad credit car loan. One way to avoid this is to have a decent down payment—20% or better. Another way is to choose a vehicle with high resale value. This will help slow down depreciation.

Buying a used vehicle makes sense if you want to keep your monthly payments affordable. Since used cars depreciate slower than new cars, they make better short-term collateral for lenders.

When you buy used, you have the chance to get a more expensive model than you could afford if you bought it new. For about the same amount, you could own a new Hyundai, a two-year-old Taurus, or a six-year-old BMW.