If your car has been casually dating your mechanic lately and the situation is shifting into “it’s complicated” territory, you might ask, “Should I repair or replace my car?” You wouldn’t be alone. Anyone who holds onto their cars for years faces this question at different points along the road trip.
The past month and a half has come at us from both sides when it comes to our cars, bringing up the dreaded question of whether we should repair or replace my car. As with most situations in life now, as we stared down at the different options and weighed the financial costs of each, we found a silver lining. We could use our misfortune and turn it into a learning opportunity not just for ourselves but for The Budget Brigade. Below, we walk you through our thought process to help you with yours.
- If the repairs will cost more than the car is worth once fixed, then it isn’t worth fixing
- Unless your car is a beater being held together with Bondo and the transmission or engine blew, repairing it is likely going to be the better financial situation
- If you’re in a tight spot financially, asset what has to be done to make the car functional versus what is more a creature comfort you can skip to minimize damaging your bank account
- If your situation is right on the margin and you aren’t sure, sleep on the situation for a night or two so you don’t make an impulse decision you’ll later regret
At the beginning of November, the window in our older car fell into the door while my husband was driving home from the airport.
Missing a window in rainy and moldy Florida is not ideal, so we scrambled to repair it before we left for vacation. On the way home from our road trip a few short weeks later in our other car, a cluster of four warning lights randomly lit up simultaneously halfway through the ten-hour journey. After some minor troubleshooting, the lights disappeared. Then the engine began to stall immediately after starting, so off to the shop it went.
When we received the estimate to repair the car, I received this text message from my husband:
$3,700 for an A/C compressor that blew up, along with a few other maintenance items for a car with over 120,000 miles.
While we have a nice emergency fund and have been saving in a car sinking fund for years, I Dory’d as well. We’d budgeted for an oil change, a full vehicle inspection, and a new set of tires before a road trip planned for the following summer. $3,700 was not the dollar amount we had in mind.
Understanding the Real Problem in the Repair or Replace My Car Debate
The most important thing to understand when assessing whether you should repair or replace a car is something overlooked during our initial assessment. This oversight caused a lot of unnecessary stress and freaking out. When measuring the situation, consider:
How much are the repairs versus how much is the car worth once you make the repairs?
If the repairs will cost more than the car is worth once fixed, then it isn’t worth fixing.
If you find yourself in this situation, you’re better off scrapping the car for what you can get. Or sending it off in a badass Viking funeral pyre. If you opt for the second option, please share the video in our budgeting and personal finances Facebook group as we would love to see it!
While we assessed our options, my husband mentioned the car was worth about $5,000 to $6,000.
With the known problems coming to $3,700 and with a potential fuel or electrical problem still in the mix TBD—along with tires down the road—our margin shrank to an uncomfortably small amount. I sat with the printed quote in front of me, not sure my beloved Strawberry (in honor of Gus’s Blueberry from Psych—you know that’s right!) would live to fight another day.
As we pow wowed over dinner, I confirmed with my husband that he checked the Kelley Blue Book value. Well, no, he confessed. They wanted all his personal information, along with a kidney and a spleen before the site would show him the estimated value. He got the $5,000 as a trade-in value on Carvana.
With the potential of sending our car out to pasture, we dug a little deeper and checked AutoTrader. There, we found a “great deal” Honda that was the same model but a couple years older with 30,000 more miles. The great deal price on this car? $7,750.
Suddenly, our Strawberry wasn’t a $5,000 car anymore. It was more like a $8,000 – $9,000 car.
That makes a huge difference!
Facts are your friends. Get an honest assessment of what your car is worth in its normal working order, not the best or worst offer you find with one click on the internet.
Repair or Replace My Car: By the Numbers
A car in Florida without a working air conditioner isn’t worth much. If we decided not to repair it, we would likely have had to sell it for parts, getting $1,000 to $2,000 most out of it.
Putting the money into the car for the repairs not only gets us back to market value, but is gives us a working car again. This buys us time to prioritize our car sinking fund in our monthly budget so that we don’t have to take out a car loan.
While I don’t like to think about costs in terms of payments, it was a good reminder to put things in perspective for us. The average monthly payment for a new vehicle is now a staggering $726. For a used vehicle, the amount is still $533 (1).
That means if we repaired our car, in 7 months we’d recoup the money we’d spend on a new to us car payment.
We realize most people hate math, but it’s worth running the numbers here. Car loan payments are one of the biggest taxes on your personal finances that could be keeping you from reaching your financial goals.
Assess How Long A Repaired Car Will Last
While it’s impossible to predict how long a repaired car will continue to run until it breaks down again and you have to hit it baby one more time Britney style, you can make an educated guess.
Honda’s are known for their reliability. I can easily see our Honda making it to 200,000 – 250,000. My husband is a little more on the doom and gloom/the sky is falling side. He thinks at around 150,000 miles, we’ll have to cross our hearts and hope not to die when we climb into the car.
We compared the last time we took the car in and the mileage at the time of the last service to determine how many miles, on average, we put on the car a year.
21,680 miles / 20 months = 1,084 miles a month, or 13,000 miles a year
Considering for a year during this timeframe, I was driving forty miles for work everyday before switching to working from home, this estimate is likely high, especially once you factor in two very long road-trip vacations this past year.
You’ll know your own driving habits better than anyone else, so assess your situation the best you can using the same process.
Since I’m remote for the foreseeable future, we ballparked future wear and tear at 10,000 miles a year.
150,000 miles to potential death – 120,000 miles currently = 30,000 miles until the waters get choppy
30,000 miles until Final Destination / 10,000 miles a year = 3 years until more math
Compare Your Repair versus Replace Assessments
Spending $3,700 would buy us three more years with our car while only costing us what would be the equivalent of 7 months of car payments. And once we hit the 150,000 miles point, the car won’t be completely worthless. We’ll still in the worst-case scenario be able to scrap it for parts for around the $1,000 – $2,000 we outlined above.
Once we laid out the likely situations, the choice became easier and easier to make, even though approving $3,700 in repairs made me what to upchuck funk into the closest toilet. Moments like these are why having an emergency fund is so important to financial stability, which is why it’s the second rung of our FIRE ladder, right after setting your goal(s).
Different Situation, Same Math
We assessed the Ford problem the same way a few weeks earlier than the Honda. Though the numbers were different, the math was the same.
Fofo the Ford is older and shows its age more. The little plastic knob on the gearshift broke ages ago, so it’s prone to dive bombing your legs while you’re driving if you’re a fidgetier such as myself. It has 140,000 miles on it for a model known to have a lot of issues.
At this point, every mile that car can limp out is a gift from the Flying Spaghetti Monster. Even a broken window becomes a “should we fix it or should we scrap it” debate, since it’s not worth much above junking it for parts.
We had a hard time finding a shop willing to do the work on this car, but we didn’t give up hope. We reached out to friends and families, with a plea and a prayer. One of my former coworkers offered to help. A mechanic, he used his connections to find parts and had the car fixed within a week for around $250.
$250 is less than even one month of an average used car payment, so it was well worth the cost.
While we plan to sell the car in the next year or two, we weren’t planning on selling it now as we’re still saving up for the Subaru we’ve got our eyes on. This $250 again bought us patience, so we didn’t feel like we had to rush out and buy a new car to replace it. Plus, the $250 was a repair we’d need to make anyway if we hope to sell the car for anything more than parts since no one wants to buy or drive a car without a window.
Car Payments Don’t Change the Math
“But what if I already have a $500 car payment? Wouldn’t that change the math?”
Not likely, no. Why? Because what your car is worth is what it’s worth. If you owe more than it’s worth, with or without repairs, you’ll have to either find the difference and fork it over to the bank or you’ll have to roll the negativity equity into your next car loan. Please, please don’t do this. Rolling negative equity is a debt that snowballs against you until you can’t get out of a car loan because you owe too much and don’t have a car worth anything.
If you still have a car payment, it’s even more critical that you don’t panic and trade it in at the first sign of a broken window motor or an angry A/C compressor.
Assess What Has to Be Repaired and What You Can Live With
If you’re broke and working your way out of debt, a $3,700 repair estimate like we got will make you want to vomit like Comet as well.
When we thought the car might only be worth $5,000 and before we spoke to the shop for confirmation the electrical issues were caused by the A/C issue, we were very concerned about dumping $3,700 into a car. The last thing we wanted was to find out once we fixed the A/C system that it still had electrical gremlins that needed exercising. “Bright lights! Bright lights!“
I Googled can you run a car without an A/C compressor, and the great internet wizard confirmed we could.
I printed out the estimate from the shop and added up all the costs strictly related to the A/C issue. That totaled $2,500, meaning we could have a running, functional car that would be in working order without such minor worries as the drive belt breaking while driving or the transmission leaking anymore.
December, January, and February are about the only months in the year where you can live in Florida without turning into the Wicked Witch of the West. “I’m melting! I’m melting!“
Would it be ideal? No, especially since it’d been a wet winter so far, and we wouldn’t be able to defog the windshield, which would mean no driving in the rain.
But a $1,500 patch to get the car going until we were ready to replace it was an option to consider, especially if we had a smaller emergency fund and no car sinking fund because we were earlier in our FIRE freedom journey.
Needs versus wants often get skewed in our culture, so I want you to microwave some popcorn, chug a Dr. Pepper, and then sit with your car situation and be honest. Get a second option. Or a third.
Cars don’t have to be pretty and they don’t have to be fully functional in order to get you where you need to go during this season of life.
When my husband and I met as broke twenty-year-olds, he was driving an old hand-me-down car with a seatbelt that choked me every time I climbed in, no functioning air conditioning, and a window held up by a spatula. Spoiler alert: I married him anyway. Getting through college with the least amount of debt possible and getting to his job that helped him do that were more important than picking me up in a fancy sports car. I admired him for it.
Final Thoughts on the Repair or Replace My Car Debate
Americans L-O-V-E their cars. I get it. I spent my teenage years and twenties obsessed with open-wheel racing and even worked in motorsports for the first stint of my working years. I love the smell of ethanol burning in the morning and the roar of hundreds of horsepower ready to bolt.
But our obsession with cars can turn logical math problems into quick emotional decisions that have long-lasting effects in our personal finances.
Unless your car is being held together with Bondo and the transmission blows, it’s almost always a cheaper and better financial decision to repair it, even if you end up turning around and selling it because you got 99 problems and you don’t need that car being number 100 anymore.
Whatever you do, don’t panic and rush the decision. That will almost always lead you into a dark alley where Michael Myers is waiting. Instead:
- Pull together an honest assessment of your financial situation with both situations of repairing or replacing the car – can you afford both options or do you need to focus on strategizing patch and go?
- Get a written estimate of the repairs.
- Assess what needs to be done versus what can wait to be handled later and reevaluate that repair cost.
- Check what the current market value of the car is with and without the repairs.
- See what it would cost to replace the car. This does not mean a flashy, brand new car (unless you can afford it and were planning to upgrade soon anyway) but a similar model near the same age with a little less mileage. Sometimes, an extra $1,000 or $2,000 can be a significant upgrade when you’re driving around the Mystery Machine’s ugly stepsister.
- Take a deep breath and sleep on the decision if you’re feeling panicked or rushed, even if it means bumming a ride to work from a colleague or friend for a day or two. You’ll make a better decision and have less chance of buyer’s remorse if you can approach the problem in a calm state of mind.
While most of us would love to own a brand new Tesla, myself included, when we check our personal finances, we’re working with Corolla budgets. This doesn’t mean you’ll never get your Tesla, it just means not today.