This is a scenario surely not foreign to many. You have an older car – it’s not immaculate. The new car smell faded a decade ago. There are some dings and chipped paint. But hey, it’s paid off. You might as well run it until the proverbial wheels fall off, right?
The inspection is due, so of course you ensure the required items are all functional and passable. The car is taken in and passes. Sweet, story is over, right? Well, unlucky for you the mechanic’s courtesy check wouldn’t let you get away that easily. You have a price limit in mind of what you will repair and plan to disregard all else. But, one of the problems is legitimate. The issue could render the car useless in a week? A month? A year? Who’s to say?
The cost? 3,000 big ones. Much more than your price limit. And more than the car is even worth. You figure that it is now time to start looking for another car. But, is that really the right move?
ARGUMENT FOR A NEW CAR
I’m not sure about you, but I base the majority of my decisions on common sense and logic. My first logical thought in this actual scenario was: I will absolutely not pay for this. My reasons being:
- Paying more in repairs than the car is worth makes no sense
- There is no guarantee that another costly issue won’t occur shortly thereafter with an 11-year old vehicle
- The money gained from a sale or trade-in could contribute toward a new down payment
Paying more in repairs than the car is worth makes no sense
I stand by this logic. Putting $3,000 into a car worth $2,500 doesn’t just make its value $5,500 after the repair. With an already depreciating asset, who wants to make that type of investment?
There is no guarantee that another costly issue won’t occur shortly thereafter with an 11-year old vehicle
Aside from this major problem, the car received rave review from the mechanic and the stamp of approval from the state to continue using the roads. The engine only has 40,000 miles on it and the tires and brakes are in good condition. All bets are off though with an older car. Understandably, a costly issue could pop up on a vehicle of any age and condition, but it is hard to deny the higher likelihood.
The money gained from a sale or trade-in could contribute toward a new down payment
There isn’t much else to state here. While the value is pretty paltry, it would provide a good starting point for buying another vehicle. Additionally, in reference to the last point, there is no guarantee that the car would have any value months or a year from now if something else were to happen.
ARGUMENT FOR THE REPAIR
Once I got past the initial thought process, I opened up to the other side of the argument – make the repair. This argument is also steeped in logic, but requires a deeper dive. My thoughts:
- With an engine only at 40,000 miles, regular maintenance could see the car running another 60,000+ miles or 5+ years at the current usage rate.
- The average APR for a used car loan using my credit profile is 7.43%. Woof.
- Acknowledging the many variables that play into a car payment, assuming a car payment of $300 a month, it would only take 10 months of car payment to equal the cost of repairing the old car.
With an engine only at 40,000 miles, regular maintenance could see the car running another 60,000+ miles or 5+ years at the current usage rate
A car engine can be called the “heart” of the car and a healthy heart bodes well for the rest of the body. Acknowledging once again that additional large issues could arise without prediction, regular maintenance truly could have this car running for years to come, saving thousands on car payments above what it would cost to make the repair.
The average APR for a used car loan using my credit profile is 7.43%. Woof.
The last time I financed a vehicle, the average APR was 4.63%, and with my credit profile, the percentage received was much lower. This represents thousands of dollars over the course of a loan, depending on the loan amount. While nobody can truly predict where interest rates could be in the near future, it is hard to lock yourself in to over 7%.
Acknowledging the many variables that play into a car payment, assuming a car payment of $300 a month, it would only take 10 months of car payment to equal the cost of repairing the old car
The key here is that there are many variables – variables that play a huge role in this equation. However, at face value, it is worth noting how quickly the $3,000 saved from not doing the repair would be gone into the car payments.
WHAT’S THE SOLUTION?
To be completely transparent – this is still an ongoing discussion in our household. The reason? I don’t think there is necessarily a right answer. I very likely will follow-up this post with a deeper dive into the numbers at some point, but to reiterate, the key here is there are many variables.
In times where there are too many variables, especially both quantitative and qualitative, the necessary goal is to gather as much data and information as possible from people that know more than you, consult with those you trust, and ultimately, just act.
Just make a decision and move forward. Still to be determined how we move forward.
