For some, a car is simply something that gets you from point A to point B, and there’s no reason to get the newest or most luxurious car. The challenge of holding onto a car for 10 plus years, though, is that you reach a point where you need to either continue putting money into the car for repairs, or look to buy a new car. Today’s cars are built to run 150,000 to 200,000 miles or more, but repairs and maintenance start to creep up when you pass the 100,000-mile mark. Considering that the average age of cars on the road now is about 11.4 years, many car owners are in this situation.
According to Edmunds, if the cost of repairing the car is greater than either its value, or one year’s worth of new car payments, then it’s time for a new car. If the repair is half the value of your car, though, then it makes sense to do the repair.
To find your car’s value, start by finding your car’s year, make, and model on Kelley Blue Book, Edmunds or NADA Guides. Evaluate how long the repair can extend the life of your car. Don’t forget to check for recalls on your vehicle to avoid paying for repairs that the dealership will repair for free.
Reasons to consider a new car
- Safety features – Make sure your existing car has the most important safety features, such as airbags, anti-lock brakes, traction control and tire pressure monitor. (For a more complete list, see Consumer Reports Guide to Car Safety Features.) Remember, there’s no benefit to keeping your old car if you aren’t safe when you drive it.
- Growing family – The combination of a growing family and important new safety features often go hand in hand when deciding whether or not to buy a new car. Your sedan may not be as accommodating to a family as a larger SUV or mini-van would be.
- Gas mileage – New cars must conform to higher fuel economy standards, and as a result, gas mileage has improved. If you drive often, getting an extra couple of miles per gallon may lead to significant cost savings over the life of the car, especially when gas prices are high.
- Technology – Features like navigation, rear-view cameras, Bluetooth audio, night vision and assisted cruise control are available in new cars, and many times double as safety features. These features may not be necessities, but many find them worth upgrading for.
Reasons to keep your old car
- No monthly car payment – You’ve spent years making payments on this car, and now it’s paid off. At this point, monthly car payments might not fit into your budget.
- Familiarity – Let’s face it, change is not easy. You might be really attached to the Honda you’ve been driving for the last 12 years.
Over your lifetime, it’s likely that you’ll own at least five or six cars. Instead of making car payments, those funds could go toward saving for a goal like retirement. If you like to trade in your car every couple of years to get the latest features and gadgets, and to avoid maintenance, leasing may make more financial sense.
Remember, safety is always number one as there’s no point in saving extra money if you aren’t safe while driving.
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Geoff has always enjoyed talking with people about finance, learning about their investments, financial strategy, and business sense. His interest only deepened with time, and what began as a hobby has now become a life-long passion, with an unparalleled passion for continuing education that makes him an expert in many subjects from traditional taxes and investments to business succession planning and executive compensation negotiations.
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