Should I Buy a New Car or Repair My Old Car?

According to S&P Global Mobility, the average age of passenger vehicles on US roads has recently hit a record high – 12.5 years. No wonder. Rising prices and tight supplies are forcing car owners to hold on to their four-wheeled friends for as long as they possibly can. But there is a point when it becomes more economically beneficial to get yourself another vehicle.

So, should you buy a new car or fix an old one? Below, you’ll discover the pros and cons of both scenarios, as well as a few other factors that might influence your decision.

Key Takeaways

• Use the 50% rule to learn when it is time to sell your car rather than repair it.
• The 50% rule is when your repairs start to cost more than 50% of your car's current value, it is time to buy a new one.

Is It Better to Buy a New Car or Fix Up an Old Car?

Any of the following can be a good enough reason to give up your old car:

1. Your trips to the mechanic have become too frequent and it has even become difficult for you to keep up with the costs.
2. The vehicle breaks down quite often, sometimes putting you in dangerous situations.
3. The repair needed will potentially cost about half (or even more) the value of the car.
4. You have already been planning on buying a new vehicle. If the car requires repair, you don’t necessarily have to take care of it. Just make sure that you tell the next owner about the problem when the time comes to sell your old friend.

But, just like with everything in life, making the right decision is rarely that simple. Let’s dive deeper into the topic and have a closer look at all the advantages and potential downsides of keeping an old car that constantly needs to be repaired.

Benefits of Repair vs Replacement

Whether you should repair or replace your vehicle will depend on several factors.  Here are the main things that you might want to consider.

Benefits of Repairing Your Car

• Repairing a car almost always costs less than buying a new one. If you’re on a tight budget, continuing to fix up your car might be your only choice.
  • Even such a severe repair as a blown motor will most likely not cost you more than $7,000 which is cheaper than a new vehicle. Of course, you can always use the money to make a down payment, but you should remember that it’s not the only expense you would have to take care of.
  • Monthly payments, registration and insurance costs, scheduled maintenance – even a new car requires additional financial investments.
  • Another thing to keep in mind is that a new car loses 11% of its value immediately after you leave the lot. And though you can try searching for a used car, remember that it might come with its own mechanical problems.
• Fixing up is a good idea if you simply need the car to last a bit longer. If you have already been saving up to buy a new car and you need just a few more months or a couple of years to finally reach your goal, then continuing to drive your old car might make sense.
  • Even if your vehicle broke down, repairing it might be better than depleting your savings account and getting a new ride ASAP.
  • Give yourself the time you need to set aside just enough cash and then make the purchase without making any major sacrifices. 
• Finally, repairing your old car may be worth it if you have a sentimental attachment to the vehicle. Of course, continuing to fix your first car or your dad’s gift for decades might not be a great idea, but if you’re ready to continue driving it while it’s still safe, you certainly have the right to do that.

Benefits of Replacing Your Car

• You are sick and tired of having to worry about any future breakdowns. Unfortunately, old vehicles are unpredictable. If you have just had a mechanic fix your engine, that doesn’t mean that something won’t happen to another part of the system tomorrow or the day after. Buying a new vehicle may finally allow you to catch a break. 
  • New cars aren't invincible. But you’ll at least know that the vehicle’s warranty lasts for 3-5 years, which means that you won’t have to pay for any major repairs out of your pocket for quite some time.
• The trips to the repair shop started requiring too much time. To get some components fixed, you may have to visit the mechanic a few times. Other repairs might simply need constant attention, so you’ll find yourself in the repair shop at least once a month or so.
  • If you’ve got a lot more important things to do, then a new, more reliable car might be worth the investment. 
• You just want a new car. Perhaps, your old vehicle looks so bad that you’re embarrassed of it, it can’ stop rattling, and you can’t justify spending an extra dollar on keeping the old car running.
  • If the vehicle stops bringing you positive emotions and you understand that you can afford to get a new car, then go for it.
  • If your family is growing, and you’d now prefer to be the owner of a larger car or SUV, it might be a good enough reason to trade up your old friend. 
• You’re looking for a safer model. Older cars don’t have such important safety features as airbags, crumple zones, backup cameras, and automatic emergency braking. If your old vehicle has not been modified, practically any newer model will be a lot safer. 
• It is also recommended to go for a new car if you tend to drive long distances. The chances of the old vehicle breaking down a long way away from home are a lot higher. Once you replace the car, you won’t have to worry about such issues for quite a while. 

Related: Paying for a new car wth cash? Purchasing your new car with cash may be suspicious.

Buying New Will Cost More Right Now

For a lot of Americans, their car payment is the second biggest expense they have to take care of each month after housing costs. The average monthly car payment for a used vehicle is $520 and for a new one, it’s $730. That’s a lot of money.

In most cases, you would also be required to have full coverage insurance while you’re repaying the loan. Drivers with no tickets or accidents typically pay an average of a little over $2,000 annually for such insurance. This is an expense you should not forget about. 

Another thing to bear in mind is car depreciation. Buying a car is not an investment as it’s a depreciating asset that loses value over time. New cars will lose around 20% of their value in the first year, and most vehicles will be worth only 40% of what you paid after 5 years.

So, overall, if your car is in relatively good working condition, taking care of even an extra expensive repair would be a lot cheaper than going for a new vehicle. And if you don’t have enough money set aside to cover the urgent repair bill, you might want to consider taking out a loan.

Related: 17 ways to get a discount on car insurance

How To Tell If It’s Time To Replace Your Car

If you’re looking for a formula that’ll help you decide whether leaving your old car or buying a new one would be better, use the “50 percent” rule: If your car needs an expensive repair and the cost is close to or more than 50% of the vehicle’s estimated resale value, then the time has come to go car shopping.

You should also consider the car’s overall condition and its history when making the decision. If you have been looking after the vehicle and the car still looks good, then fixing the mechanical problem might allow you to continue using it for years to come. A properly maintained car can easily exceed 200,000 miles.

What Repairs Are Unavoidable?

No matter how well you have been taking care of your four-wheeled friend, at one point or another, you would have to invest quite a sum to keep the vehicle going. The costs and repairs mentioned below are completely normal and unavoidable if you have had your car for years and you’re using it daily.

Scheduled Maintenance

Consult the owner’s manual to find out how often you would have to replace such elements as belts, spark plugs, hoses, and other components. These are the wear-and-tear items that will eventually need to be replaced. In general, such parts need replacement every 90,000-120,000 miles.

By the way, if it’s possible to replace a few elements in one go, you should do that as the combined cost of the services will be lower. 

Oil Changes

Most manufacturers recommend getting the oil changed every 3,000 miles or 3 months. Depending on different factors, an oil and filter change might cost you anywhere between $20 and $150.

New Tires 

Make sure to keep your tires inflated to the right level – this will help prolong their life. The average driver would need to get the tires replaced every 6 years or if the tires have worn down (you should start thinking about the replacement if the tread depth is about 1/8 of an inch deep). You can expect to spend between $500 and $1,200 on a set of tires.

You would also want to get your tires rotated every 6 months or 5,000 miles to promote more even wear. The average cost of such a service is about $50-$70.

New Brake Pads

Brake pads should be changed every 20,000-50,000 miles, but make sure to consult your owner’s manual for the exact numbers. Replacing both the front and rear brake pads typically costs $200-$600. 

New Battery

A car’s battery needs to be replaced every 4-5 years. However, the exact timeframe would depend on the type of battery, your driving habits, and plenty of other factors. Replacement car batteries usually run between $80 and $400.

If you’re dealing with these car maintenance costs, it doesn’t mean that you should automatically consider getting a new vehicle. These are just the bills that you would have to cover in any case. So, if these are the only issues that you’re having to take care of, replacing the car won’t be necessary.

How To Extend the Life of Your Car

A car is not a one-time investment, you would have to regularly spend relatively large sums of money on the vehicle to make sure it stays in good condition.

To avoid high repair bills and unpleasant surprises, you would have to make sure that the car is maintained at the right intervals. When it comes to older vehicles, you might have to pay extra attention to the parts that commonly break down. You can always look for advice on forums and get a ‘preview’ of what’s going to happen to your four-wheeled friend as it ages.

Ideally, you would also want to find a trustworthy mechanic in your area who can get the job done for relatively cheap.

That said, if the issues with your vehicle keep you up at night, parting with it may be the best decision. If you manage to do it on your own terms without waiting for the vehicle to fully break down, you might still be able to make a decent amount when trading the car in or selling it.

Note: The content provided in this article is for informational purposes only. Contact your financial advisor regarding your specific financial situation.