Your car is hood-up on the side of the road again, and you’re dreading the repair bill. If you’re not sure whether to fix your old car or spend the money on a new one, this guide should offer advice on how to make the most practical choice for your needs, with the help from financial and automotive experts.
When should you spend money on repairs?
It’s usually less expensive to repair a car than buy a new one, making budget reasons the top choice for repairing the car. Other reasons a repair may be a good choice include:
- Insurance and registration fees will be higher on a new car.
- You love your car. Sentimentality is not the most practical argument for fixing a car up, but it’s a real one. An extended warranty is a good solution: According to Ali Ahmed, founder of the shop-at-home service for new cars called NowCar, “Many extended service contracts can be purchased even if you’ve owned your vehicle for several years, which can defray the cost of very expensive repairs. Many of these extended service contracts can be financed at no additional cost so you can have a consistent monthly expense.”
- If your car has been reliable and it’s at the 90,000 to 120,000-mile range. Around this time, expensive wear and tear related repairs tend to come up. Hoses and belts dry and crack and need replacing, some electrical components stop working, and new brake rotors are likely. Dealers recommend a major service at 100,000 to replace the water pump, timing belt, and other drive belts at a cost between $600 and $1,000.
- The 100,000-mile service is a hit to the wallet, but many car brands could run reliably at least another 100,000 miles. According to Rob Drury, executive director of the Association of Christian Financial Advisors, “As recently as 30 years ago, 100,000 miles was widely accepted as the shelf life of a car. Brands such as Honda, arguably Toyota, and GM products can often coast easily through 200,000-400,000 miles without significant problems.”
When is buying a new car the answer?
If you feel like your car is a ticking time bomb, you’re better off ditching your car before it ditches you. Doing so while the car still has some value gives you some extra money towards a new car by selling it or trading it in. A new car is the answer if:
- You want peace of mind. An older car can go out at anytime, even after an expensive repair, for unrelated reasons. New car warranties have you covered for at least three years, often more. Some new cars come with free standard maintenance as well. Scott Chesrown, former car dealer and VP of Strategy and Business Development for Vroom, an online marketplace where you can buy and sell your vehicle, agrees. “It’s important to consider the total cost of ownership of your car — the advantage of buying a low mileage, high-quality car with a warranty means you’ll end up paying lower costs in the long run,” he says.
- You want something safer. Backup cameras, electronic stability control, multiple airbags, driver assistance packages and blind-spot monitoring are more commonly standard options in new cars. Rich Hyde, the COO of Prestige Financial, a consumer auto financing service adds that “as a car ages, the chance of a major issue also increases. Besides being an inconvenience at the very least, major mechanical problems can potentially endanger drivers and passengers while in the car, or leave them stranded unsafely on the roadside.”
- You want more fuel efficiency. A Toyota Corolla Eco has a combined gas mileage of 36 miles per gallon. A 2000 Toyota Corolla has a combined gas mileage of 25 miles per gallon. Using the Department of Energy’s fuel economy calculator, the new car will save you more than $2,000 driving 15,000 miles per year for five years at $2.23 per gallon.
Can you really afford a new car?
A quick way to decide is by doing the math. Mike Rabkin, president of From Car to Finish, a national new car negotiating service and information provider, makes it simple: “Retire or trade-in a vehicle when the repair bill is more than the current book value of the vehicle at the time.” Another good rule of thumb is if the cost of repairs is greater than one year’s worth of monthly payments, it’s time to consider a new car.
A new car can be in reach if you can wait for the best deal. Buying during the Summer and End of Year sales can save you money. According to William S. Matthews, a Houston-based financial counselor and author of Everything I Needed to Know About Money I Learned From My Broke @$$ Friends: “Buying a new car is a bit easier mid-year. You might not have a great selection to pick from, but it’s the difference between paying $4,000-$5,000 less.”