Should You Keep and Repair Your Old Car or Buy a New (or New to You) One?

Ah… the age old question: When should you finally get rid of your old car? As with most things in life, there is no easy answer, but it depends more on the state of your finances than the state of your car.

Scenario A: You are heading to grad school in a few years, have a kid in college in a few years, or plan to take a lower paying job for career reasons or any other event that means your monthly budget will be more constrained 2-3 year out from today than it is for the next 2-3 years. If that’s you, you should get a new (to you) car now.

Why? Well, if you get a solid used car, you could have it paid off or close to paid off by the time the event happens 2-3 years down the road. If you still have a few car payments left, they will be pretty well integrated into your monthly budget by then. Plus, your old car would probably either require replacement in 2-3 years or have more substantial repairs and you will be left with no choice by then.

Scenario B: You think your financial picture will be better in 2-3 years. Maybe you’re graduating, expecting a promotion, or planning a job move to a higher salary. If your financial picture will look brighter in a few years, nurse your old car until you’re in a better financial position. Yes, even if repairs are half of what the car is worth. as long as your repair total per year is less than 12 months of a car payment, lease, or down payment, you should nurse it.

Why? When you’ve made your job move or whatever event makes your finances better, you are in a better situation to assess what you can afford to pay in car payments and can make a more informed decision. A bigger monthly payment will fit better into your monthly budget then rather than now. Repairs can be taken care of by your rainy day fund (which, of course, you have…)

Scenario C: Your financial position will look pretty much the same over the next few years. In this case, the answer is related to the car’s costs. Remember: you always want to make this decision BEFORE you need a bunch of repairs so you can still sell your current car. If it needs major repairs and you make the decision to buy a new (to you) one, the old car is worth $0 (or close to it) or you have to make the repairs anyway to get some value out of it. Then you put off the decision again because your old car is running again. Make the decision right after a maintenance check or repair, not when your mechanic tells you about the repairs you need or when you start hearing that weird banging noise.

If the total amount you expect to pay in repairs (not counting regular maintenance, which you would have to do on any car) over the next year is more than either the down payment for a new (to you) car or a year of payments you should consider buying a new (to you) car.

BEWARE: some dealers and mechanics will offer a “100 point check” or top to bottom check or general maintenance check-up with whatever repair you’re having done. They have a list of things that are wrong with your car so you pay money to fix them. Most of them are not necessary at that moment. Either google it, ask another mechanic, or ask your mechanic point blank, whether repair needs to be done in the next 6 months for safety reasons. Always make repairs that make your car unsafe.

Buying a used car is usually a better deal than any new car or lease. Just sayin’…