Is your car spending more time in the repair shop than on the road? Are you throwing money into keeping your car running, only for something else to break down? It’s a common frustration for car owners: deciding whether to keep repairing your current vehicle or to finally invest in a new one. Knowing when is it not worth it to repair a car is a crucial financial decision. While the core of the decision often boils down to comparing your car’s value against repair costs, several other factors, including your personal budget and the ever-changing car market, play significant roles.
Key Considerations at a Glance
- Generally, if repair expenses exceed your car’s market value, replacement is advisable. However, the type of car and your financial situation might make repair the more sensible option.
- The repair-versus-replace decision hinges on factors like car value, repair costs, frequency of repairs, safety concerns, and the prevailing car market conditions.
- If repair is your chosen path, strategies include comparing repair quotes, undertaking DIY fixes where possible, and prioritizing essential repairs.
- If replacement is the better choice, opting for a used car, paying in cash, and saving up for your desired vehicle are financially sound steps.
When Does Car Repair Stop Making Sense?
A simple rule of thumb is that if the cost to fix your car surpasses what it’s actually worth, it’s likely time to consider replacing it. However, this isn’t always a straightforward calculation. Depending on your specific vehicle and financial constraints, repairing your existing car might still be a more practical approach than purchasing a new one. Confused? Let’s clarify.
Deciding whether to repair or replace your car involves evaluating several key elements:
- Car Value
- Repair Costs
- Repair Frequency
- Safety Concerns
- Current Car Market Dynamics
Car Value
Your first step should be to determine your car’s current market value. Assess its worth both in its current condition and its potential value after repairs. Websites like Kelley Blue Book (KBB) and Edmunds are excellent resources for this. By entering your car’s year, make, model, mileage, and condition, you can obtain an estimated selling price.
For example, consider a 2014 Honda Civic with approximately 100,000 miles. In good working order, it might be valued around $7,000. However, the same car needing a major transmission overhaul will be worth significantly less.
Understanding your car’s pre-repair value and the potential increase in value post-repair helps you make an informed decision about whether to invest in fixing it or move on.
Important Note: If your car loan balance is higher than your car’s worth, you are in an upside-down car situation. In such cases, selling your car becomes even more critical to avoid further financial burden.
Repair Costs
Once you have a grasp of your car’s value, the next crucial piece of information is the estimated repair cost. Contact several repair shops to get quotes for fixing your car, including both parts and labor expenses. If the total cost of repairs approaches or exceeds the car’s value (even after the repair), it’s a strong indicator that investing in a replacement car might be wiser.
[Start budgeting with EveryDollar today!] (https://www.ramseysolutions.com/ramseyplus/everydollar?int_cmpgn=RamseyPlus_Traffic&int_dept=rplus_bu&int_lctn=Article_Promo&int_fmt=text&int_dscpn=EveryDollar_Budgeting-MOB_CTA&campaign_id=EveryDollar_Budgeting_BlogInsert&lead_source=Direct)
Furthermore, inquire about the longevity of the repair from your mechanic. Is it a short-term patch or a more durable fix? Spending a significant sum on a repair that only provides a few more months of use might not be economical. Conversely, a repair that significantly extends your car’s lifespan could be a worthwhile investment.
Let’s revisit our Honda Civic example. A transmission replacement might cost around $4,000, but it could significantly extend the car’s life.1 In this scenario, a $4,000 repair on a car valued at $7,000 could be a sound financial decision. You could choose to sell the car at a higher value or continue driving a now-reliable vehicle.
Consider the type of car you own. Luxury or foreign cars often have more expensive parts and higher labor costs. Factor this into your repair cost assessment to determine if maintaining your current vehicle remains financially sensible compared to switching to a less costly-to-maintain model.
Repair Frequency
Another critical factor is how often your car requires repairs. Routine vehicle maintenance is expected for all cars. However, frequent, costly repairs on an older, lower-value vehicle can become a financial drain. If you’re consistently facing repair bills of $500-$700 every couple of months on a car worth only $7,000, replacing it is likely the more economical long-term strategy.
Research typical maintenance and repair schedules for your car’s make and model. Online car forums can provide insights into the typical lifespan and common issues of your vehicle, as well as owner opinions on whether certain repairs are worthwhile. Brands like Toyota, Honda, and Lexus are known for their longevity with regular maintenance, often exceeding 200,000 miles. Holding onto such vehicles might be advantageous if you own one.
However, if your mechanic knows your coffee order by heart, or your car spends more time broken down than running, it’s time to seriously evaluate the true cost of these frequent repairs in terms of money, time, and stress.
Safety
Safety is paramount. However, differentiate between genuine safety concerns and using safety as a pretext for a new car. Malfunctioning transmissions, broken taillights, brake problems, or steering issues are legitimate safety hazards that demand immediate attention. But simply having an older car with higher mileage does not automatically equate to an unsafe vehicle.
If safety is a major concern, consult a reputable mechanic. They can provide a professional assessment of any critical safety issues and advise on whether these can be effectively and reliably repaired.
Current Car Market
While car repairs can be unwelcome expenses, navigating the current car market to find a suitable replacement can be equally challenging, and potentially more costly. Depending on vehicle availability and prices, purchasing a replacement car now might be significantly more expensive than repairing your current one and postponing a purchase.
While a $700 repair bill isn’t desirable, compare it to the potential financial burden of a new car payment. The average new car payment in today’s market is around $738 per month This one-time repair cost suddenly looks more appealing when weighed against long-term debt.
Avoid rushing into buying a car you can’t realistically afford. Keep a close watch on the car market and make a decision that aligns with your current financial situation and budget. This might mean repairing your current car to extend its life while you save, or upgrading now if you have the financial capacity.
If Repairing Your Car Seems Best
Get Multiple Quotes
Just like your mother advised, always shop around, especially for car repairs. Don’t automatically accept the first quote you receive. Get an initial diagnosis from a trusted dealership or a well-established mechanic shop, but don’t assume their price is definitive. Labor costs often constitute the majority of repair expenses and tend to be higher at larger, more prestigious shops.
To find a reliable mechanic at a more affordable price, ask friends and family for recommendations. Then, call several local mechanics to compare quotes. Inquire about any available discounts or special offers while you’re on the phone.
DIY When Possible
Perhaps your car needs new brakes, but also a replacement door handle. Consider having the brakes professionally done but tackling the door handle replacement yourself. Order the part online and utilize YouTube tutorials for guidance. Assess your skills honestly, but remember that performing even minor repairs yourself can lead to significant savings.
Prioritize Necessary Repairs
If repair estimates exceed your immediate budget, discuss with your mechanic which repairs are critical and which can be deferred. Never compromise on essential safety features like brakes, tires, and timing belts. However, you can likely manage without features like power windows or a premium sound system while you save up for those less critical fixes.
If Replacing Your Car is the Right Move
Opt for Used Over New
The allure of a brand-new car with a warranty is strong, but avoid the trap of a hefty monthly payment like that $738 average new car payment.
Choosing a used car over a new one is typically the wiser financial decision. New cars depreciate dramatically faster than used cars, losing about 60% of their value in the first five years And newness doesn’t guarantee fewer repairs. J.D. Power reports that newer cars are becoming more problematic in terms of initial quality, especially those packed with advanced technology.4 Your shiny new car might land you in the repair shop more often than you anticipate.
A used car doesn’t equate to poor quality. You can find a reliable used car, even in today’s market, that won’t be a constant source of mechanical issues. Thorough research and knowing where to look are key.
Pay with Cash
Car loans might seem like the only way to afford a car, but car loans significantly increase the overall cost due to interest.
For instance, financing a $25,000 car at an 11.93% interest rate (average for used cars) will result in paying over $33,000 in total, and committing to car payments for five years.5
Remember, all cars require maintenance and repairs. With a car loan, you face monthly car payments in addition to repair bills. The better approach is to buy your car with cash, using your savings and trade-in value. This way, you own your car outright, avoiding debt and interest charges.
Save for the Car You Truly Want
If your current savings don’t cover your desired car, create a strategic savings plan. Start by purchasing an affordable car with the cash you have available, perhaps around $5,000. This can provide reliable transportation for at least 10 months. Then, consistently save the equivalent of a new car payment – for example, $738 per month.
After 10 months of disciplined saving, you’ll have accumulated over $7,000 for your car fund. Adding this to the trade-in value of your current car (say, $4,000), you’ll have over $11,000 to invest in a significantly better vehicle. This upgrade is achievable in under a year, without incurring any debt! It’s a testament to the power of saving and planning.
Repair or Replace: Budgeting is Essential
Regardless of your car situation, car ownership involves ongoing expenses: fuel, maintenance, and future replacement savings. Managing these costs, and all your finances, becomes significantly easier with a well-defined budget.
A budget allows you to allocate funds for regular monthly expenses and provides a framework to handle unexpected costs like flat tires or car repairs. You can adjust your budget to accommodate these unforeseen expenses without derailing your financial plan.
The EveryDollar budgeting app simplifies this process. It enables you to create a financial plan, monitor your spending, and save effectively for any goal, car-related or otherwise.
Taking control of your finances with a budget puts you in the driver’s seat. Start creating your free budget with EveryDollar today!
Save more. Spend better. Budget confidently.
Get EveryDollar: the free app that makes creating—and keeping—a budget simple. (Yes, please.)
Start EveryDollar for Free
