We’ve all had that one week where multiple trips to the mechanic left you moments away from sending your car to the crushers. But then you wondered, should you repair or replace that old car?
In a perfect world, replacing a troublesome car would be an easy decision, but car prices are still sky high. The average cost of buying a new car is $48,763. And the average cost of purchasing a used car is $26,510. That’s not chump change!
Deciding whether or not to repair old rusty is a big choice to make, one that can be laced with emotion as well. Here are some helpful tips for deciding whether or not to pull the plug on your old ride and start the search for a new (or new to you) one…
Get Clear On Your Values:
Our vehicles become a big part of our lives. You might have even come up with a cute nickname for yours. And deciding to repair or replace your car can be a deeply personal decision. Running the numbers is important, but you’ll need more than math alone to come to a conclusion.
What role do cars play in your life?
If you nerd out about cars the way that we nerd out about money, then it could make sense for you to spend a little more on a car that will bring you joy – if you can afford it.
Some people really value cars, and want to experience that new car smell. Getting a new car can come with the peace of mind of knowing the vehicle’s entire maintenance history. If that’s your craft beer equivalent, then hey, more power to you! Just make sure that you’re cutting back in other areas of life that aren’t as important to you. Also, definitely don’t expose yourself to financial hardship by taking on sky-high payments. That temporary joy just isn’t worth the financial anxiety and stress that comes with pushing your budget into the red.
Others don’t care as much about cars, so long as they can reliably get you from point A to B. If that sounds like you, opting to purchase a used car or repairing your current vehicle might make more sense for your situation.
Related: More ways to cut down your annual car costs
What do you need out of a vehicle?
Before you ditch your Honda Odyssey for a luxury two seater, it’s important to consider your lifestyle, and what you need from your car.
For example, if you have a family, or are expecting to have some more little ones, you might want to opt for something with extra seating. If you’re a musician or contractor and need to haul around lots of equipment, you might want to make sure your car has ample trunk space.
Also be sure to consider where you live. An off-road vehicle sounds great, but if you’re living in the middle of Manhattan it’s probably not necessary. If you live in a colder climate, having a vehicle with four wheel drive could offer added peace of mind.
If your current car checks all your lifestyle boxes, it might make sense to keep it. But if you’re current ride isn’t meeting a few of those important needs, it might be time to consider a newer vehicle.
What is your financial situation like?
Perhaps the most important aspect of whether to repair or replace your car is your financial situation. If you’re a millionaire and you want to go “whole hog” and get a new car, go for it! It’s not an excuse to go overboard.But if owning a new car is something you value, and you’ve got the cash, then let your money follow those values.
Sometimes, you also get to a point where your time is more valuable than money. And if you’re spending hours every month at the mechanic, it could be time to take the plunge on something new. If you’ve been crushing it financially, sometimes you can afford to spend a little bit more on convenience.
However, if you don’t have the money for a new car or repairs, or if you still owe money on an older vehicle, it can become a more difficult decision with limited options.
If you still owe money on an older vehicle, we suggest trying to get out of that debt asap. Rolling what you owe into a newer vehicle can have you owing more on the newer car than it’s worth. It might also cause your interest rate to skyrocket. That puts you in a financially vulnerable position. Remember, we want to keep interest working for us, not against us.
Look At The Math:
When deciding whether or not to purchase a new car, it’s important to also look at the nerdy math stuff and crunch the numbers. Sometimes, if we’re feeling really over our cars, we can convince ourselves that we’re pumping an unreasonable amount of money into it. We assume repairs are costing us an arm and a leg, but are they really?
Keep Track Of Repairs & Associated Costs
If you’re feeling like your car is a total dud, look to the numbers to determine if that’s really the case.
To get a good read on whether or not your car repairs are more costly than they should be, it’s a good idea to familiarize yourself with what the average repair rates are for your car. RepairPal can show you the average cost of repairs, as well as compare it to the cost of other vehicles.
It’s easy to overestimate how much you’re spending to maintain and fix your car. But Consumer Reports has some pretty good data on the maintenance and repair costs. It includes how much different brands are likely to incur. And given how expensive the average new car payment has gotten ($716 according to Experian), there’s a really good chance that you’ll spend less in an average year on fixing your current ride than you’d spend in just one month of having a car payment!
Once you have an understanding of what it costs to own and operate your vehicle each year, you can evaluate where you stack up. Be sure to look across a few years. A major repair could leave you with one particularly expensive year, which can skew your numbers. It’s important to be honest with yourself here. Take emotion out of the equation to get an accurate read on how much your car is costing you each year. Same with how much it’s likely to cost you moving forward.
How Much Longer Could Your Car Last?
A lot of folks think that once they roll past the 100k mile mark on the odometer that it’s time to start looking for a replacement. But your car is still a baby at that point! Cars, trucks, and vans are lasting a lot longer these days. Don’t assume that just because your car needs some routine maintenance that it’s time to upgrade.
Try looking into reliability models for your vehicle to help decide if your car is worth holding onto in the long run. Also be sure to consider any recent upgrades or repairs you’ve made that could have significantly extended the life of your car. If your car is historically reliable, it typically makes more sense to keep it.
How Does the Cost Of Repair Compare To The Car’s Value?
If you’re standing at the crossroads of a costly repair, it’s important to consider how the cost of repairs compares to the value of the car. The older your vehicle gets, the less sense it can make to pump more money into it.
A good rule of thumb to follow is that if the repair will cost more than half of what the car is worth, it could be a sign to consider ditching it for a newer model. You can estimate the value of your car using the Kelley Blue Book’s Car Value Estimator.
Make sure to be honest when you’re evaluating the condition of your vehicle. Because that’s the best way of making an informed decision. Is the car in great condition? If so, enter that into the estimator tool. If it’s looking old and haggard, that will impact the current value. Definitely think before pouring a chunk of money into fixing it.
Consider Doing The Work Yourself:
If you’re mechanically inclined, you could consider doing some repairs yourself. This could be to either extend the life of your car, or increase the value of it should you decide to sell it. Doing the work at home could significantly lower the cost of keeping the car on the road for a few more years.
Youtube is a FREE way to learn about car repairs. There are millions of videos on every type of car model that are available at your fingertips… for FREE. Some will likely be able to help you diagnose and fix the problem you’re facing. Even if it’s a little out of your comfort zone, sometimes just understanding the problem better can help you get a cheaper repair. Having a diagnosis allows you to shop that specific repair around with different mechanics.
Most repairs are easier than you think. And YOU are smarter and more capable than you think! 💪 There’s no harm in at least trying to fix something yourself before paying someone else to do it.
How To Get The Most Money For Your Car:
If after all of this, you’ve decided that it’s time to let go of Ol’ Rusty, then it’s time to start thinking about how you’re going to get the most money for your car.
Sell To A Private Buyer
Typically, you’ll make more sense selling your car to another individual than you would selling to a dealership. There is often a huge discrepancy between what you’ll get from a dealer versus what you would be able to command selling it to an individual buyer. For example, I ran the numbers on my car using Kelley Blue Book. It showed that my car could be worth approximately $1,444 more if sold to a private buyer as opposed to trading it in. That’s a pretty big difference!
One thing to note, trading your car into a dealership can have tax benefits in some states. Be sure to weigh those before you make a final decision to list and sell that car yourself.
Take Good Photos
If you’re planning on listing your car on a website like Facebook Marketplace or Craigslist, it’s important to make sure your car looks good in the photos. Make sure to give Ol’ Rusty a good clean, or even take it to the carwash. The return on your time and money will be totally worth it!
Things To Consider When Replacing Your Car:
If you’re leaning towards replacing your car, here are some points to think about…
Depreciation Is Faster on Newer Vehicles
When looking to buy a new car, it’s important to take depreciation into account. New cars start to depreciate the minute you drive them off the lot. And new cars can typically lose up to 60% of their value after the first five years. That’s why we’re such fans of buying a gently used car. We would rather you let someone else take that hit for you!
However, if you’re planning on keeping a new car for a long time (10+ years or so), it doesn’t have to be completely off the table. Check out our article on When Buying A New Car Makes Sense to for more tips on buying something new.
Get It Looked At By A Mechanic You Trust
If you’re planning on purchasing a used car, make sure it’s looked at by a private mechanic that you trust before any cash changes hands. That inspection will likely cost you some money. But it can save you thousands of dollars in the future and hours of headache and hassle.
If you don’t already have a mechanic that you think highly of, word of mouth recommendations are a great way to find a reliable one. Ask your friends and neighbors who they’ve used in the past! And then look up Google and Yelp reviews on those mechanics. Crowdsourced information should give you a good idea of the kind of service they offer too.
The Bottom Line:
Feeling like you’re always headed back and forth to the mechanic can be a drag. But with the high cost of car payments, sometimes it can make financial sense to deal with the annoyance for a little longer.
Whether you decide to repair or replace your car, we want you to do it from a place of financial responsibility. With a little foresight, you can help to give yourself more options down the road.
Also, create a sinking fund for repairs, maintenance costs, and new vehicles. This can help to ease the pain in the future and prevent you from dipping into your savings account! It’s fairly simple – just set aside a little money every month or with every paycheck. Eventually you’ll build up a decent chunk towards that eventual purchase you’ll need to make. That way you won’t have to take out a hefty car loan.
Hopefully we’ve helped to provide some insight into this decision. Be sure to check out these related posts for more helpful tips on keeping your transportation costs in check.
- Killer $5,000 Cars & The Future of EVs with Consumer Reports’ Mike Quincy
- Affordable Used Cars & The Future of Office Life
- The Pros & Cons of Living Without A Car
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Beer tasting notes:
While talking about the decision to repair or replace that old car we enjoyed a Zombie Dust by 3 Floyds Brewing Co! Big thanks to Doug for sending this one our way! And as we ramp up the podcast with an additional Friday episode every week, we could really use your help.. We’d love it if you help spread the word about How to Money. Hit the share button, subscribe if you’re not already a regular. And give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to spread the word to get more people doing smart things with their money in these difficult times!
Best friends out!
