Should I Repair or Trade-In My Car?

My husband and I recently faced the dilemma on whether to repair an older car or finally pull the trigger on buying a new one. Ultimately, we decided to purchase a new car and get rid of the older one. When I shared the story of our decision with a few friends they had not ever considered things the way we did, so I thought perhaps it was worth sharing. The principal is simple: don’t spend more to repair a vehicle than time you will get out of it where time is measured in monthly car payments.

Allow me to explain with an example. Let’s say a monthly car payment on a new car is about $400. Your current vehicle needs $1000 worth of repairs. In order to justify the repair, it should get you 2.5 months of problem-free travel ($1000/$400 = 2.5). If you decided to spend the $1000 to repair the car and one month later, something else breaks that costs another $500, you’ve officially reached the point where fixing the old car is costing you more per month than a new car and it’s time to sell.

This is what happened to the clunker I purchased my senior year of college. I got a great deal on a 2005 Kia back in college. It had nearly $10,000 worth of body damage from a massive hailstorm. It was too damaged for the sellers to be seen driving it, but was the perfect fit for a poor college kid. I bought the car in cash and drove it for 7 years. About once a year I’d have to put $700-$1000 into repairing something, but I never had any cascading failures- until the past year. Suddenly it needed new tires, new brakes and $1100 worth of repairs to a cracked exhaust pipe, which was starting to hot-box the cab with exhaust. Not good. On top of that, it didn’t have anti-lock brakes or air conditioning. We live in Georgia. I hear it gets really hot here.

After a lot of back and forth with my husband, we decided it was time for a new car. Instead of spending all that money on repairs and new tires/brakes, we put it down on a new vehicle. We’re about a year into paying off the new car and have both agreed it was the right decision. There’s a chance that we would have gotten the time out of the old car, but there is something to be said about driving a reliable car and air conditioning doesn’t hurt either ;).