When Is It Time To Buy A New Car? (Your Advice)

Your Advice - help answer readers' questionsCars can cause a lot of unexpected expenses when they get older and start to break down more and it is not often easy to know when a car should be traded in for a newer model. This reader wanted to know opinions on how one can tell when it’s time to get rid of the old car as to not waste money:

I need some help on what I should do with my current car situation. My current car is on its last legs and recently has been costing me quite a bit of money in repair bills. I’ve paid out over $500 in the last 2 months and it has drained my emergency fund.

I know that it will be time for me to get a new car soon, but I don’t have any money put aside for it. I’m wondering if I should continue to use this car and hope that it doesn’t break down anymore so that I can save up a bit of money for a new car and don’t have to take too much out in a loan, or if I should take out a loan to get a newer car that I know will be more reliable.

Is there a formula or guide to go buy to know if the car is going to cost more to repair and it’s time to get a new one? Since money is really tight for me, I need to make the right decision because I can’t afford to waste money one way or the other. Do you have any suggestions?

How do you determine when it’s time to get a new car and what financial steps do you take before getting it?

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11 Responses to When Is It Time To Buy A New Car? (Your Advice)

  1. Dy says:

    I’m not sure on this either. I have a 2000 Corolla that’s working wonderfully now, but I want to plan for the future. When should I replace my car?

  2. Alex says:

    I too have this concern. I have a ’93 Toyota Paseo, whose wheel bearings and transmission are on shaky ground.

    The standard formula is to never spend more on a car in repairs than it is worth (i.e. the blue book value). My car has a trade-in value of $875, so that is one thing to keep in mind.

    However, I think the better measure would be: how much would getting another car cost me per year: in looking at the used car market, I see 2 or 3 year old Honda Civics are like $12K, if you figure about 10 more years and probably around $1000 in repairs for that Civic over that time, that works out to $1300 per year, so as long as my beat up Paseo doesn’t cost me more than $1300 a year in repairs, I am better off with the Paseo.

  3. mitchell says:

    i’m also going through this process and here are my $0.02:

    as alex said, the standard formula is to never spend more on a car on repairs than it is worth. so, if you’re going to end up spending $5000 on your $1000 car, sell the car for scrap and put that $5500 or so down on a new car.

    having said that, put that off as long as possible, keeping your eye out for good deals. if you know your car is going to die soon, prepare. save and watch for bargains. if you can put it off until december, that is when you’ll get the best deals, for example, a lot of places will reduce financing to 3% for any length, just to get cars off the lot (in any other situation, though, you should have financing before you step on the lot — car dealerships’ financing plans are designed to drain you).

    i know, its mostly common sense, but consider it a friendly reminder. hope it helps.

  4. Michael says:

    My formula is whether the next repair is half of blue book value. The other financial consideration comes from time=money. As someone that works on billable hrs, screwing around with repair shops and rental cars can be very expensive. Even if you don’t work on billable hrs, you’ll have to make up those work hrs somehow.

  5. junger says:

    We’re looking at getting a new car, too, but it would be our second. Buying it would be out of necessity, though, not convenience, so the monetary reasons for getting it will need to (hopefully) outweigh the costs.

  6. Spokane Al says:

    You are in a difficult situation because you do not have money for a replacement vehicle.

    You say that your current auto is on its last legs. Is this something you know for sure? Perhaps it would be worthwhile to spend $100 or so to get a professional opinion on the true condition of your car. Then you can be in a better position to make a decision.

    It does concern me when you say that $500 spent over two months drained your emergency fund. This indicates that your emergency fund is vastly under funded.

    While considering the car issue perhaps you may want to consider your financial picture. If you have not already, begin using Quicken or MS Money to find out where your money is going. Then work to make some changes in spending and increase your savings. If you are a credit card user – stop. If you have debts, work on paying them off.

    You need to have an emergency fund, a retirement fund, a savings fund(such as for auto replacement and repair expenses), and perhaps a vacation fund.

    It sounds, from the brief info you provided, that your finances are a bit slim. I would look at the whole picture in addition to the car replacement analysis.

    Take care and good luck.

  7. Debbie says:

    Each person is different. I like to buy reliable cars that are ten years old (so, Dy, it will be time to sell your 2000 Corolla in about three years–to me!) and then keep them about ten years.

    So my cars get down to being worth only $500 near the end, and repairs are still $200 – $700 or whatever, just like on newer cars. So I’m not a fan of comparing repair costs to current values, but I do compare them to replacement values.

    I sold my first car the fourth time repairs cleaned out my bank account–then I went without a car for four years. I had decided that I just couldn’t afford one yet.

    I sold my second car when it was 20 years old after someone crashed into it and the insurance money was enough to pay for another ten-year-old car. (So many repairs were required all at once that the decision was easy.)

    My third car is still only 16 years old and runs fine, so I still have some time.

    So I’m going to echo Alex with getting your car inspected (you can use a Lemon-Busters-type place or, if you trust you mechanic to not be too biased, just ask your mechanic what the prospects look like).

    New cars and newer cars usually cost much more than maintaining your older car unless you have an unreliable and/or expensive model and would be replacing it with a reliable and/or inexpensive model. Even then, when you buy a used car you often have to fix up a few things that the previous owner let slide at the end because they knew they were about to get rid of it. So unless your current car stays trouble-free for a while, it looks like you’re going to be hurting a bit regardless of what you do.

    So, you might also look into other forms of transportation: mass transit, carpooling, bicycling, etc. If that would be at all possible, it could give you some good breathing space in your finances. Does your employer have a car-pooling program or do you know of any co-workers who live near you? You could offer to pay for all the gas (they pay for insurance, repairs, etc.) or barter a weekly home-cooked meal for four or some other affordable yet valuable thing for such a service.

    Good luck.

  8. Amy F. says:

    This question really doesn’t have foolproof answer, I’m afraid. $500 is not a lot of money for car repairs, in truth. Even a newish car could require a repair in that price range. For example, a perfectly reliable car that is due for a new timing belt, as all cars are eventually, will require about $600. All cars have parts that wear and need replacement with age. It really depends on what the repairs your car needs are. Does your car need a new engine? New transmission? New suspension? Those are more serious and more expensive issues that might make it worth it to get a new car.

    I agree with Alex. I think that the conventional wisdom about not spending more to repair a car than it’s worth is ridiculous. I would rather spend $1,000 repairing my car then spend $2000 on a new one. Either way, I get a car that works, but one way is a lot cheaper, less time-consuming and less stressful than the other. I also like Debbie’s ideas for alternate ways of getting around. In some situations having a car really is a necessity, but sometimes we just think it is because we’re used to it.

    If you do not know much about cars, I would start by getting Cars for Dummies and some basic car repair books from the library. This will help you learn how to maintain your vehicles well and avoid getting ripped off by repair shops– not that I’m saying you haven’t been maintaining your car or that you’ve been getting ripped off, just that if you don’t already have this basic knowledge, acquiring it will save you a lot of money in the long run.

  9. Amy F. says:

    Another benefit of sticking with your existing car is that you already know its history and its issues. With a new (to you) car, you lose that knowledge base. When you buy a used car, you’re almost always going to have to repair it right away. You’re buying someone else’s problem that they don’t feel like fixing. That said, just because someone else is fed up with their car doesn’t mean it won’t suit your needs just fine. My car is 20 years old and I am the third owner. I love the thing.

  10. Brandon Harper says:

    One side note that is somewhat off-topic, being a car guy, I think regular maintenance is a really good idea. Not just oil changes, but getting things replaced at regular service intervals. I couldn’t debate the fiscal qualities, but your car will last /a lot/ longer and be much more dependable if you’re looking to stretch your money out. I definitely have no qualms about buying an older car as long as it’s been maintained correctly, and has a Honda badge. 🙂

  11. Simone says:

    I feel your pain too. I have a 93 Subarun Impreza I paid $1500. I was pretty desperate. But now my desperation has cost me about $1000. in repairs, and I so want a new car but I looking around for a deal and there are none out there for us poor people.

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