When we present our customers with a large repair estimate for their older car, the question I get over and over again is: Should I keep this old clunker or buy a newer car?
When you’re faced with a large repair bill, it’s natural to dream of getting a better car, a newer model or just a more reliable vehicle.
However, most of us live in a practical world of hard financial decisions, and the purchase of a newer car is not to be taken lightly. So, when should you repair your car, and when should you buy new transportation?
This is obviously a subjective question without a clear, right or wrong answer. Many factors figure into this decision. If you figure that the average driver purchases perhaps only five to 10 cars in an entire lifetime, it’s not like deciding whether to buy a new pair of jeans.
First, you’ll need to ask yourself some questions. If money is a finite resource for you, as it is for most of us, have you properly budgeted and examined how much you can afford to spend on repairs as opposed to buying a new car? Please don’t forget to factor in the cost of sales tax and the insurance payments on a newer car.
In addition, you will obviously need to determine the nature of the malfunction. What broke down? Is it serious? What’s the total cost of parts and labor? What’s that expense compared to the total outlay of a down payment and new monthly payments on a replacement vehicle?
In most cases, you save significantly by fixing your current car as opposed to purchasing a new vehicle.
Be aware of how much new cars cost these days – regardless of whether you buy or lease. Even moderately priced smaller models (like Honda Civic, Toyota Echo and Ford Focus) can carry a sticker price of $15,000 loaded. If you lease the vehicle and add in the various related fees, the total amount spent climbs higher and, you’re left with no equity after the lease period.
If the body of your current car is in reasonably good shape (check the underbody to see how rusty it is) and the car suits your needs, take it to your mechanic and find out how much it would cost to bring it into mechanically good condition. You may find that, even if it needs transmission or engine work with new tires and shocks, these repairs may cost less than the sales tax on a new car. Check out your present vehicle thoroughly, then decide.
Beyond your personal budget for repairs, another way to check on whether it’s reasonable to repair your car is to check its current Kelley Blue Book value. A general rule of thumb is that if a cost of repairing your current car is less than 15% to 25% of your car’s total Blue Book value, it’s still worth repairing. Obviously, if you are finished making installment and your car is now an asset and payment-free transportation, it becomes an even wiser move to keep the car.
If you do choose to drop your old car, should you buy new or used? A two-year-old used car will cost significantly less than a new car – and, in many cases, it will look the same. Body styles change only once every four to six years, so you won't be able to distinguish a three-year-old car from a new one.
On the other hand, there is the concern about buying a used lemon. Always have a used car inspected by a good mechanic before you purchase it. They will be able to tell you if it had been in an accident and what repairs and maintenance need to be done so it will be safe and reliable. You should also check the reliability rating for the car you are looking at in an unbiased publication such as Consumer Reports. Remember that a properly selected and well maintained used car kept for five years will give you just as good service as a new car for about half the price. For help buying a great used car, you can go to my website at www.usedcarexperts.com and down load my book for $14.95.
The question of repairing, buying or leasing comes down to personal preferences, finances and driving needs. When you make your final decision, try not to overreach yourself, and don’t give up on Old Faithful before her time.