In 2022 my car (a 2010 Nissan Versa) kicked the bucket. The engine was broken and needed to be replaced. Rather than spending even MORE money on repairs (I had spent a few thousand or so on various other parts at this point), I decided to buy a newer car that would, presumably, require fewer repairs in the short term.
I bought a 2021 Honda HRV for ~$20,000 at 7.59% APR. I pay $414 a month and have $16k left on it. I bought this car under the worst possible circumstances:
- Used car prices were very high at this time
- Interest rates were high due to inflation
- I needed a car because my previous one had died so I didn’t have the luxury of time
My hope, at the time, was that inflation would be tamed and interest rates would eventually be lowered, wherein I could refinance the loan. I no longer believe this is a possibility within the next 4 years or so. I was also hoping to find something small and cheap like a Honda fit, but I learned that they had stopped producing them. An HRV seemed like a sensible kind of car given the modest physical needs of how I used a car at the time
So, here’s my question: Should I just sell my car for something older? Maybe like a 2015 or so? Or should I just stick with my current machine until it’s paid off and try to refinance after 2028?
If I could go back in time, I would’ve sold the Versa in 2020 or so, before I had spent a bunch of money on repairs. Hindsight is 20/20 though
I don’t think this part is really right. Buy a newer car because you want a newer car (and can afford it) or because your old car can’t do the job you need anymore. Newer car is almost never going to save you money.
If you have an old paid-off car that is worth basically nothing on paper but in good shape and runs well for you, and it needs a repair, it’s almost always going to be cheaper to do the repair.
If you get a more expensive car from a dealer (new or used) the car payments and interest are so much higher than even ongoing frequent repair costs it’s just crazy.
Even in OPs story replacing the engine — I don’t know what else was wrong with it — but if they put $6K into a new engine and next year $1K into brakes and next year $1K into tires that’s still way less money than just three years of interest payments on a nice new CRV. That’s not even counting the down payment and the principal!!
You might have lots of reasons besides money to replace a car, but that’s a question whether the cost is worth it, not a question of whether it’s cheaper
The place in my mind when the old car is no longer economical to repair is when:
The repair can’t really fix it eg the body is rusting away etc. Car is done unless you rebuild the whole thing, too bad time to say goodbye
frequent breakdowns, even small cheap easily fixed breakdowns, mean you can’t get to work and lose money or risk your job (consider if the breakdowns are related cause though — maybe you need to replace all old rotted rubber hoses and exposed gaskets in the car all at once and it will be reliable again? Making an unreliable car become reliable again requires you or somebody you trust knows something about cars to decide; most people can’t do this)
the repair (including rental car or lost work due to downtime, which can be more than the actual mechanic cost but totally counts just the same as a cost to you) is more than the cost of whatever vehicle you’re going to replace it with — this… mostly doesn’t happen. putting $6K repair plus $800 for two weeks’ car rental into replacing the engine on a otherwise-$10K old Versa is still cheaper even than buying somebody else’s $10K old Versa in running condition (by $2200 + tax + registration) — let alone a newer car.
That is a generally accepted rule for repairing a car. It is not hard and fast, as it is not a simple decision. So you are correct, it’s not right, but it is also not wrong either. It’s a matter of whose yacht you want to finance? Your mechanic’s, or your lender’s.
The only time I would consider putting more than half the worth of a car into fixing it, is if it is a vehicle that is difficult or impossible to replace. Case in point is I have a friend that has one of the last Toyota Camry’s with a manual transmission to come off the production line. He bought it new. About 4 years ago at a bit over 200k on the odometer, he replaced the short block, plus a lot of other work to essentially make the car “new” again. His total bill was over $10k, which is more than the car is worth in total. Why? He just loves it that much and Toyota no longer offers a manual in the Camry. He hates automatics and has declared it will be a cold day in hell before he ever owns one.
The other situation is safety. If you are driving a '95, and you have a baby or something, moving to an '08 gets you a lots of advancement in safety and you cannot pay to replace the people you care about.