Keeping up with the Joneses may motivate some vehicle purchases, but it can take your financial welfare into a money pit very quickly. If your economic status is less-than-stellar, you may want to think twice before you sell your perfectly reliable and paid-for 2000 Honda Civic to upgrade to a new Jaguar. But if your old beater is threatening to hit you with a large repair bill, you’re probably asking, “Should I sell my vehicle repaior just grin andr it?”
When to Grin and Repair It
Sometimes, your piggy bank is just not holding the wad of cash you were hoping for. But financial experts recommend trying to avoid car loans as much as possible. If your car is old and has a lot of issues, you may feel caught between a rock and a hard place. This is when you need to ask the following questions:
- Will my savings fund buy me a decent car? If you only have $1,000, it’s extremely unlikely that you’ll find a car for that price that doesn’t need some major repairs.
- How much am I paying for regular maintenance? This includes things like gas, insurance, oil changes, replacing air filters, and other normal stuff.
- How much am I paying in repairs in one year? This doesn’t include normal maintenance. This is the big stuff–brakes, timing belts, head gaskets, fuel pumps, transmissions, and the like. Spending $300 on your car every couple of months is still less than a $300 car payment every month.
- Is the repair going to extend the life of my car? If your car is likely to run for another two years after spending $1,500 on a new timing belt, you will save by repairing it–even if your car is only worth $2,000. That’s because the repair is still going to be less than a $300 car payment every month.
When to Sell It
It’s usually more cost-effective to repair a car than to sell it, but there comes a point where you’re sinking more cash into an old jalopy than the use you’re getting out of it. As for me, I prefer to sell my vehicle before it gets to the point of being in the repair shop on a continual basis. If you’re in these shoes, here are the questions you should ask:
- Is that $3,000 repair bill going to give me a practically new car for at least two more years? If there are other large repairs that are threatening to erupt or to grind your car to a screeching halt, it’s better to sell it.
- Are my annual repairs and maintenance costs adding up to more than $300 per month or $3,600 per year? Keep in mind that a newer car will have maintenance costs too and that insurance costs will likely be higher.
- Do I need a reliable car for long-distance driving? If you’ve got a long daily commute and you’re missing too much work because of car problems, it’s time to get another car.
Should I sell my vehicle or grin and repair it? If you have the cash stash for a new car, by all means, get one. If you don’t have the cash, the answer depends on your situation and your cost/benefit analysis.