Car Troubles – Repair or Replace It?

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Car troubles - repair or replace?Car troubles? Should you repair or replace it?
If you have car troubles, and your car is much over five years old, you face a real dilemma. Should you repair or replace your car? The answer for each person—in each case—will be different. It will depend upon the history of the car, its overall reliability, and your personal needs. Let’s take a look…

If you have car troubles, and your car is much over five years old, you face a real dilemma. Should you repair or replace your car? The answer for each person—in each case—will be different. It will depend upon the history of the car, its overall reliability, and your personal needs.

Let’s take a look at both options…

The Case for Repairing Your Car

Car troubles - repair or replace?
Car troubles? Should you repair or replace it?

A good friend of mine—one who is quite adept when it comes to cars—has told me repeatedly that it’s always cheaper to repair a car than it is to replace it. That sounds like a broad statement, but I believe that in most cases it’s actually true. Here’s why:

No monthly payment. Since the average new car now costs somewhere between $20,000 and $30,000 (but obviously it can be much higher), you will almost certainly have to buy the car with a loan. And that will mean a monthly payment, which could really mess up your monthly budget. A typical car payment today is in the $400-$500 per month range, but it could be a little less—or a lot more. If the payment is in the middle of the range, say $450, you’ll pay $5,400 per year in payments for the new car ($450 X 12 months) for the next few years. Is it worth taking on that expense to avoid a $1,000 repair bill? Probably not. Note: be sure to pay attention to not just the monthly payment amount, but the duration of the loan as well!

No up-front outlay for a down payment. If you buy a new car, not only will you have monthly payments, but you also have to make a fairly large down payment in order to keep the monthly payments from being too high. Even with a trade-in on your old car, you may still need to put up several thousand dollars extra in order to keep the monthly payments reasonable. How does that look compared to the repair bill?

Lower insurance and ad valorem fees. As a general rule, the more valuable your vehicle is, the higher your auto insurance will be. And if you live in a state that has an ad valorem tax (an annual tax based on the value of the vehicle), the tax will be higher because the new car has a higher value. The higher insurance premium and ad valorem tax will be added on top of the new monthly car payment.

Your old car can last longer than you think. It’s easy to become frustrated whenever an older vehicle needs a major repair, especially if the car is more than 10 years old. But just because an older vehicle needs a major repair doesn’t mean that it’s ready for the scrap yard.

My mechanic—who works at a high volume repair shop— shared that they have customers who have vehicles with over 1,000,000 miles on them. They are mostly commercial vehicles, but the owners reason that it is more cost-effective to spend $1,000-$1,500 repairing them each year than replacing them. This is also a very common practice in developing countries, where vehicles are typically 20 to 30 years old. In truth, a car can continue running for just about as long as you are willing to repair it!

The Case for Replacing Your Car

All of the above arguments aside, there are still tangible reasons for deciding to replace a car rather than fixing it. While it is almost certainly true that it is less expensive to repair a car than it is to replace it, there are non-financial reasons why it might make sense to buy a new one.

Reliability. There’s nothing quite as upsetting as either getting into your car, turning the key in the ignition—and the car not starting. Or, driving down the road and having the car suddenly stall out. Not that either of these scenarios are completely unlikely to happen with new cars, but they are far more common as a car gets older. Simply the peace of mind of knowing that your vehicle will perform as expected at any time, can make replacing the car a more desirable choice.

Lower repair bills. Regardless of age, all cars need to be repaired. It’s just that with older cars it’s a more common occurrence, and the repairs tend to be bigger. Typically, with a new car, repairs will be limited to regular tune ups, oil changes, wheel rotations, and the eventual replacement of tires. With older cars, you’re looking at replacing transmissions, blown piston rods and replacing computers, each of which cost over $1,000.

Getting the latest safety equipment. Since technology is always advancing, new cars generally have better safety equipment than older ones. And this is not just because of the new technology. Safety equipment on older vehicles tends to wear and become less efficient as the years pass. Sometimes the best choice you can make from a safety standpoint is to buy a new car, with the latest safety equipment and all of it in perfect working order.

Let’s admit it: new just feels good! OK, this point is based purely on emotion, but let’s admit it – buying and driving a new car really feels good! You can’t put a dollar price on that, but it may be part of the quality of life equation.

Other Factors to Consider

Apart from head-to-head comparison of repair or replace a car, there are factors often beyond the car itself that figure into decision.

How much do you drive? If you work close to home, you probably will be better off repairing your car. And if you work at home, the decision is pretty much a slam dunk. There’s no need to have a brand-new car—and all the expenses that go with it—if you rarely leave the house. But if your commute is a considerable distance—and especially in heavy traffic—it might make better sense to replace the car with a new one.

What is the history of the car? This gets into the “lemon factor”. If a car has a history of needing rapid-fire repairs, there may be no choice but to replace it. It does seem to be true with some cars—fixing one component only leads to the need to fix yet another. This kind of pattern means that the car is not worth repairing, and needs to be replaced.

How good are you at doing repairs yourself? If you are unable to do even simple repairs on your car yourself, then you are completely at the mercy of the auto repair industry. That can be an expensive pattern, and could figure into the repair or replace decision. On the other hand, if you do a fair amount of your own repairs, you will almost certainly be better off keeping your car than replacing it.

Fuel economy. Your old car may be reliable and relatively inexpensive to keep, but if it doesn’t get very good fuel economy, it’s slowly bleeding you. What you’re saving by not buying a new car is gradually being given back in the form of more expensive fuel costs.

In truth, the decision to repair or replace a car is a complicated one. You not only have to factor in the financial costs, but bigger picture issues as well.

What factors do you consider in deciding either to repair or replace a car?

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About Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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