Cheaper to Keep, or Time to Trade?


When a driver faces a large repair bill for his or her car, it’s tempting to just head to the local dealership, trade in the car, and drive home in something new with a full warranty.

People justify the purchase by reasoning that it saves money on repairs. After all, a more reliable vehicle is far less likely to break down and will greatly reduce, or even eliminate, costly trips to the mechanic.

In many cases, though, it costs far less to keep and maintain an older car than it does to buy a new one. Let’s take a look at a couple of scenarios, and determine if it’s really cheaper to keep your current car.

The average person today keeps a car for 6 years before trading it for a new one. Let’s assume that, 6 years ago, you purchased a car that was 3 years old. Today you have a 9-year-old car that has 110,000 miles on it and needs $2,500 in maintenance and repairs. It needs a tune-up, some rubber hoses and belts have cracked and need replacing, the front rotors need to be replaced, it’s time for a new timing belt, and an axle boot is worn out.

If you own the car outright, $2,500 is obviously far less than the $34,428 it takes to buy the average new car today. That $2,500 investment could keep the car in good shape for another 50,000 miles. In this case it’s cheaper to keep her, even though the lure of a new car might be strong.

Let’s say, though, the car you purchased was a luxury SUV. You’ve had it for only 3 years, but it was 5 years old when you bought it. You’ve crossed the 100,000-mile mark and still owe $12,000 with a payment of $280 per month. Repair costs are starting to add up, and the latest estimate was $2,500 for regular maintenance and to fix some electrical gremlins that have recently appeared.

Not only that, but you’ll need new tires in the coming months, at a cost of about $1,000, and the front brakes will need attention sometime after that, followed by a new set of spark plugs and then a timing-belt change. You could be looking at $1,000 every few months to keep your aging SUV on the road.

If you budget $250 per month for repairs, in addition to your $280 payment, you are paying roughly the same as a new-car payment. Trading the car in might mean letting go of your luxury brand, but it also means at least 3 years, often much longer, before you have to worry about major maintenance or repairs.

The other item to think about is the trade-in value of your car. It’s possible you’ll be underwater on the loan, and the trade-in value won’t cover the loan balance. In that case, the uncovered balance could be rolled into the new loan, or you could pay it off directly.

A good rule of thumb is this: If the cost of repairs exceeds the value of the car or costs more than a year’s worth of payments, it might make sense to trade in the car. Otherwise, enjoy saving money with the car you own.

Would you rather keep, and fix, your current car, or trade it in for a new one?


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1 Comment

  1. Keep and Fix! Although I obsess daily about getting a new car, my reality is that it is far cheaper and sensible to keep my current car -a paid-for 9-year old Nissan Altima- than get something new. I just had the 120,000 mile service done on it, which came to approx $700 at a local dealership.

    Yes, I hated paying that.

    But, that is the only large service and repair charge i expect to have for the next 1-2 years. Ok, i had a couple of tires put on earlier this year, but other than that i should be good to go. The car is still running very well as far and no additional repairs were spotted/recommended so it should still be far less costly than trading up for a shiny new car payment!

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