One of the biggest decisions you can make as a car owner, aside from buying a car in the first place, is when to replace it. At what point are repair costs not worth it? At what point is being without a car while it’s in the shop more inconvenient than the cost of a new car? Let’s take a look at some scenarios.
Repairs and Maintenance
Probably the top question you should consider is just how much you are paying out in repairs every month or every few months. Car payments are usually upwards of $200, so even if you’re paying around that every few months in maintenance or repairs, it’s still going to be less than a payment on a new car.
This math changes if you plan to buy a used car outright with cash. However, it’s important to remember that you are potentially buying the newer car’s maintenance as well. Unless you buy a brand new car where maintenance is covered for an amount of time, you’re still going to be paying maintenance costs on another vehicle.
Outdated vs. Updated
Another thing to consider is how outdated your car is. Would you save money in both gas and insurance if you bought a newer model? If you can combine money savings on both of these items, plus maintenance, then a new car might be the right choice. If reliability is an extremely important factor to you and dealing with random breakdowns is a major inconvenience, then it might be a better choice to cut your losses and buy a new vehicle.
Do you have a growing family or expect one in the near future? If so, it might make more sense to use a high repair bill as a good reason to get a new, and larger, vehicle. Safety features might be another important consideration if your car is especially outdated.
Do the Numbers
Some car repairs are definitely more expensive than others. Repairs like brake jobs and changing out spark plugs are considered necessary maintenance and typically run well under $1,000. However, high-ticket repairs like rebuilding or replacing a transmission or engine are going to cost a lot more. Either of those repairs run from at least $5,000 depending on the vehicle.
If you do the math, a $6,000 repair is one year’s worth of a $500 car payment. Further, suppose your car, if sold used, isn’t even worth $6,000. A good rule to follow is if your repair cost is more than your vehicle’s value or a year’s worth of car payments, then buying another vehicle makes more sense in the long run.
Consider the Intangibles
Suppose you’re in a scenario where you have paid off your car entirely, have kept up with all the maintenance, including doing some yourself, and now the car suddenly needs a major repair. If the car has otherwise been reliable and fixing it will put it back in that state, you’re not likely to save money by buying a new car. In the end, the longer you can hold onto a car, the more money you’ll save.