Is It Worth Keeping Your Old Car?

Keeping Old Car

Do you have a vehicle that is getting up there in age with more than 150,000 miles on it? Do you wonder at what point it is no longer financially responsible to keep your car? There are so many variables in play, but let’s see if we can sift through these questions.

Luckily, I haven’t had any large repairs just yet, but my 2003 Saturn Ion is 10 years old and has 161,000 miles. She (Athena, warrior princess) is paid off and has been for a while and it’s so great to not have a car payment. However, I worry about when these large fixes will happen and at what point is it financially a good idea to get a new car.

Safety & Reliability

I think the first and most important variable that we must consider is safety. If you do not feel safe in your vehicle or you are afraid it could break down or start on fire at any moment it’s time to consider getting a new vehicle or using public transit if you can’t afford one. It’s not worth it to put you or someone else in danger. Period.

Comfort and Cosmetics

In our society status symbols, in my opinion, are way over valued. To me a car serves the purpose to get me from point A to point B, not to show off a symbol to prove my worth. If you are a person that this matters to, I would assume you would have already bought a new car and not be contemplating these questions. Therefore, we won’t consider these variables much into our decision. That’s not to say that I want a rust bucket, but I’d rather not waste my money on a depreciating asset.

Repairs

As we know, car repairs and maintenance on an older vehicle is one of our top concerns. When I contacted Alec Gutierrez, senior market analyst for Kelley Blue Book he said, “It might be a good time to trade-up to a new/newer vehicle when you find yourself in a situation where a repair bill exceeds the value of your car. If your transmission goes out and you’re looking at a $1,500 repair bill, it might be time to get rid of your 1994 Dodge.” If you’re handy and willing, it’s very easy to save on do-it-yourself maintenance and repairs like oil changes and brake replacements. For example, we just replaced my Dad’s 2003 Buick’s brakes for $120, that’s a savings of $200+. And it can be done cheaper than that, but we used top-of-the-line brake pads.

Tip: Use Repairpal’s Repair Estimator. It’s a quick, smart tool to use to estimate repairs, and segments it into labor and parts. There you can also find a top shop in your area, which I also found to be handy.

Car Payments

Us, older car owners, often boast that our car is paid off. And if that is the case you should pretend like you still have a car payment and save up for your next vehicle. If that’s not the case and you need a new car today, you are looking at interest rates between 4-5% . And average new-car loans are now around 60 months or more. On a $20,000 vehicle, that’s a $377.42 a month car payment and a total of $2,645 in interest paid over the life of the loan. The common rule of thumb is the 20/4/10 rule, where 20% is the down payment; the loan length should be no longer than 4 years; and the sticker price of the vehicle should be 10% of your income. Talk about rough! Looks like a life of cheap cars for me! Granted this all plays into our American lifestyle where we think we are entitled to brand-new, shiny, expensive cars! Be smart, buy used! A new car depreciates 10 to 20% right off the lot!

Tip: Use Edmunds Affordability Calculator to help you determine what the sticker price you should be looking for when you include how much you want to pay per month, value of trade-in, and down payments.

Insurance

Generally speaking, newer cars have higher insurance premiums. This is because newer cars have a higher value and are at greater risk. Many used cars don’t need comprehensive insurance because it’s not worth the payment for a car valued at a couple of hundred or couple of thousand dollars.

If we were to put all of these variables into an equation it would look something like this:

Formula:
Annual Cost of Repairs
+
Cost of Maintenance
+
Monthly Car Payment *12
+
Monthly Cost for Insurance *12
=
Total Yearly Cost of the Car

Now take the total yearly cost of the new(er) car and compare with the old car. You will still need to consider that it is likely that repairs will increase over time and car payments will drop off within a couple of years.

Here are my very hypothetical examples based on the fact that my new car would have $250 monthly payments, not need any repairs (or they’re under warranty), and insurance is $60 a month. This is versus my old car, which may need a new transmission ($2000), has no monthly payments, and has $50 monthly insurance costs. Also, all repairs and oil changes are DIY:

Annual Cost of Repairs
+
Cost of Maintenance
+
Monthly Car Payment *12
+
Monthly Cost for Insurance *12
=
Total Yearly Cost of the Car
New Car
$0
+
$100
+
$3000
+
$720
=
$3820
Old Car
$2000
+
$200
+
0
+
$600
=
$2800

So as you can see even after the first year, my old car is still cheaper than a new car. However, most people probably don’t have the luxury of a car mechanic for a boyfriend, and thus more expensive car repairs. None-the-less I think it’s a fairly simple equation to estimate the differences in cost between the old and the new.

What is your situation and what do you think of keeping or getting rid of your old car?

Cash Back Resources

Additional Auto Resources

Comments

  1. Kristin says

    I have a very old car (model year 1996 with 135,000 miles) The transmission just died very suddenly (gears started slipping only about 10 minutes before it stopped running and had to be towed). A transmission rebuild will cost about $2500. We were planning to buy a new used car in about a year. I definitely can not afford to pay any more than $3000 right now for a car, and even that is a big financial hardship. I rarely drive my car, but I do need it 2-3 times per week just for short trips around town. I am not looking to keep it for more than one year (maybe less). We will be able to get financing for a nice used car ($15000 ballpark) in another year. We can not take on any additional debt right now because we are in the process of trying to qualify for a mortgage, and my husband has a huge amount of student loan debt. Renting is more expensive than buying where we live, so finding an affordable place to live is much more of a priority than buying a car right now. However, I do need something…. anything really to get me from point a to point b for the next 6-12 months. I am certain there are other things wrong with my car, but I have no idea what those problems are. Mechanics refuse to look at it to assess how much extra work is needed because it is so old. It is not worth anything at trade-in, even if it were running perfectly. Is there any way to get a cheap car for under $3K or less than $300/month? Is it worth spending $2500 to fix a very old car in bad shape if I can not find any other used car that I can afford that actually runs?

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