Should You Repair or Replace Your Old Car?
It’s paid off… It’s been a reliable vehicle… But the years and miles add up. Even with consistent automotive maintenance, car parts eventually start to wear out.
Suddenly, you’re facing a $1,500 timing belt replacement, or replacing the front brakes plus some alignment work for a $1,000 hit. Or both!
The reliable transportation that was saving you from car payments is now costing you big money. Is it still worth repairing the old vehicle?
No monthly loan or lease payments
A new car will cost, at the low end, about $300 a month to finance. A newer used car with a decent warranty will finance for roughly the same amount. Down payment and length of financing will affect these numbers, but this gives us a baseline for comparison.
The biggest factor in favor of keeping the car you already have? As long as your actual monthly payment is $0, you can save the entire difference of $300 or more a month. And the next factor makes a big impact as well.
New car value depreciates in a hurry
An insurance study found that in 2014 the average cost of new-car depreciation over the first 5 years of ownership was $19,623 or $327 a month. The first year alone shows an average loss over $7,700 or $644 per month.
An old car with lower resale value doesn’t depreciate much. A $5,000 car that sheds $500 in blue-book value over 12 months is costing only $42 per month.
This depreciation difference, combined with the monthly payment difference, sets you up to save about $600 a month, more or less, compared to financing a newer vehicle.
License, insurance and registration
The difference here is less expensive insurance for the old beater than for a newer car. Higher premiums can add an extra $1,000 or more per year to the cost of replacing your vehicle.
Gas, maintenance and repairs
This is where a new car would really shine (pun intended). That $600-700 monthly saving has to cover those major repair bills, which for a newer car would be $0. Gas costs on the older car probably will be higher than for a newer car. Regular maintenance should work out about even.
The bottom line on repair or replace
According to these calculations, you could afford to spend about $7,000 a year on repairs to the old car before exceeding the cost of replacing it. Which probably means your best financial decision is to try and keep it on the road as long as you can.
Unless your old car is on fire in the driveway right now, or so completely worn out that it just can’t be salvaged, regular maintenance by a trustworthy mechanic will ensure you continue to get safe, reliable value out of ‘Old Faithful.’
For a great car trick to play on your elderly relatives (not that I recommend that sort of thing), and some other funny stuff, AND a detailed breakdown of the “repair or replace” comparison, check out this link at Get Rich Slowly:
Also this one at Lifehacker, another older piece but still “right on the money” (pun intended):
To help you keep the pride in your ride, bring your “experienced car” to McKinney Motor Company. We perform ASE Certified service that keeps it perfectly maintained and helps to prevent major repair expenses. Call (505) 298-6734 today to set up your free vehicle safety inspection and get some free peace of mind as well.