When does it make more sense to buy a new car rather than pay for repairs on an old car?

Answer 1

If we take out of the equation the convenience, reliability (sometimes), better fuel economy, safety, new car pride then really the answer is never. So lets say you have 84 Toyota Corolla, its worth about $800. It needs new brakes ($300), it needs a new water pump ($200), the heater fan doesn't work ($100). Lets say you fix all those things so it safe, convienent and reliable. It cost you $500. Maybe you don't need anything else for the rest of the year. Maybe you have a big ticket item to repair like the transmission, on this car its going to be max $1,500 for a rebuild. Lets say you did all this in your current driving year, so you had to spend $2,000 on a car only worth $1,000. The value of your car only went up because you did few maintenance repairs, it doesn't mean you will now be able to sell your car for $2,800 after you did the repairs. All it means is that you will be able to drive it for another 40,000 miles without many worries other than oil changes which you have to do on a new car too. So you just spend $2,000 on your 24 year old car and everyone said "why didn't you just buy a new car?" So lets say you wanted to buy a new car. Lets say you wanted to buy another Toyota Corolla so your 2009 base Corrola is $15,995 and if you finance that over 48 months (if you can even get financing these days) at 6.5% your monthly payments are going to be $379.32 for a total cost of $18,207. So within 1 year you have no repair cost just oil changes but you have to put out $4,551.84 in payments and you vehicle probably depreciated $1,000, so a real cost of approx $5,551.84, but from a cash stand point $4,500. Used with a big repair item in 1 year: $2,000 New with payments only, not including depreciation: $4,500 So if we look at it from a numbers point of view a new car will never be worthwhile (remember I said from a cost point of view). Remember also, that we just did s big ticket repair item on your car too, normally you should look at expecting to pay $500 a year in repairs on an older import car. Some years maybe nothing but oil changes and some years $1,000. Occasionally things will happen at the same time (radiator, fuel pump, brakes) and you will ask yourself this question over again and it will always be no, its not worth buying a new car. Find a good mechanic who will tell what you need to fix now and what can wait. JohnnB