Lately, I have been giving a lot of thought to the situation of having a late model vehicle that seems to be getting long in the tooth. The question is: When do you make the switch from paying the repair bills to buying new or another pre-owned? There are a couple elements here, but the first and hardest question is do you get rid of the current car.

1997 Geo Metro

1997 Geo Metro

There are a lot of views on late model cars that have gone past their warranty period. One is to dump them before they hit a 100,000 miles because the resale value tends to drop and the big ticket items like the transmission, air conditioning and engine itself are at risk of having issues. Another method is to just keep putting money into the already paid off car because it is still less than a car payment (and you don’t have to have full coverage insurance since it isn’t financed). That alone seems to lean us in the direction of keeping the old car. But does it add up?

If you end up putting in more than $2000 a year into the car for things that aren’t routine maintenance, then you might as well have been paying a $166 car payment. Depending on the type of car (in our case we will say a small car) that could more than a new car payment. It could also be more than a pre-owned car that is younger and has a warranty. So how do you make the decision? In reality it is one-part finances and one-part want. If you want a new car or new pre-owned car than you are halfway to talking yourself into a new ride. Then it comes down to finances. My experience is that if you are going from a car that gets good gas mileage and still looks good, then it will be hard to make the numbers work out better for a new car.

However, if your car is literally falling a part and you are keeping it together with spit and bailing wire, then the time to upgrade may be right from a purely economical stance. In the end though our advise is this:

1) Check the price of insurance on the new (used) cars you want to look at and compare to your current insurance.

2) Use free auto loan calculators to asses your new monthly payment if you bought a new or pre-owned car and financed it

3) Add up all the repair bills for your current car over the last couple years

4) compare the costs of the insurance and car payment with the costs to keep your current car running.

The outcome of the above could be illuminating. Sure it won’t help the desire to have something shiny and new, but it might help keep you from tossing the old car out before it is really ready to go. If you do want a new car, may we suggest the very affordable 2010 Nissan Versa or 2011 Ford Fiesta.