Time For A Trade

By Christopher Crown

August 11, 2017 5 min read

You're driving home from the auto shop ... carefully. They say your car's axle and suspension system will be fine until the repair on Friday, as long as you don't brake or accelerate abruptly, hit any bumps or drive in extreme weather. Great. With $2,500 in repairs, you ponder handing off your clunker and cutting your losses for a new car. The choice between fixing up and buying a replacement vehicle is always challenging, but, thankfully, there are some general rules to follow when considering trading in Old Faithful.

Although the final decision when it comes to fixing up or trading in is usually tricky, the first step to analyze your car situation is straightforward and logical: calculate your costs. Matt Keegan from Carfax.com, an online database providing resources, reports, industry figures and various online calculators, suggests reviewing through the last year of repairs and figuring out your total spent on car maintenance. Assuming your fixed costs will stay relatively static (gas, licensing, insurance, car washes) if you purchase a new car, this upkeep cost is what you can compare to a payment on a new car.

The next step is to attain the current value of your car. Ronald Montoya, senior consumer advice editor for Edmunds.com, writes in a 2015 article that this step is crucial but often overlooked by drivers, who often just focus on the value of repairs. Montoya advises comparing the online calculated value of your car to the price of the repair and also to one year of upkeep. If the repair costs more than the car is worth or more than you pay in a year to own it/keep it running, it's time for a trade. Carfax suggests getting second and third opinions on big repairs to make sure you are getting an accurate assessment of the problem and the true cost.

Another factor in valuing your old car is assessing its longevity. If possible, check the dates of expensive repairs with the mileage of the car at the time. If a lot of these repairs happened early or all at once, Philip Reed, another consumer advice editor for Edmunds, suggests that you might have a lemon. Reed goes over some standard milestones of car longevity in his 2012 Edmunds.com article.

--Your car's factory warranty usually ends at around 30,000-40,000 miles. Also, this turning point is where the first major service visit usually occurs.

--The car typically goes in for it's second major service visit at about 60,000-70,000 miles.

--Although hitting 100,000 is used to mean imminent death in old cars, new cars are lasting well beyond this mileage. However, many dealers and other potential buyers are still strongly turned off of cars that have over 100,000 miles and it may be beneficial to trade just before this point if you are experiencing increased car trouble.

After you have logged the financial specifics of your car, its monthly cost and the prices of the repair, you may be eager to pull the trigger and purchase a new vehicle. However, Christa Avampato writes in her 2015 article for Money.com that slowing down and running the same statistics on your potential new car might be the most important move you make. Montoya states that, in nearly all of his consulting experiences, it is less expensive to repair a car than buy a new one. Avampato agrees and states that, even beyond the sticker price of your new car, there are many additional considerations before rushing off to the dealership. New cars often require financing, and you will need to work with your financial institution to address interest rates and monthly payments. These figures can really rack up, says Avampato, and they must be figured into your new vs old cost-benefit analysis. Keegan stresses the importance of lenders in this process and recommends knowing your credit score is solid before entering negotiations.

Although it can be a lengthy process -- comparing spreadsheets, old service bills, mileage and financing for multiple vehicles and scenarios -- it will pay off in the end to know the absolute details on which car will serve you best, keep you safe and save you the most money.

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