If you're trading in a car that has high miles or is over five years old, trading in for a newer used car that is in better shape is an economical way to go. Trading in your car for a used car over a new one can save you in a number of ways. First, you'll minimize depreciation. New cars generally depreciate in value once they are driven off the car dealer's lot. You can avoid that loss by trading in your used car for a car that is just a few years old.
By buying a car that is two or three years old, you are still driving a car that is "like new" without suffering the major loss of depreciation. In fact, you can buy the car, drive it a few years, and sell it with little loss in equity, depending on your personal finance situation. Depreciation flattens out once a car is around two years old and doesn't dip again significantly until around year five. Buying a two-year-old vehicle and driving it for a couple of years before thinking of selling it might be the most cost-effective way to own a car.