My customer is staring bleakly at the estimate we just discussed. She came in for a brake safety check, and wasn’t prepared for when we pulled her in back to show her the multiple engine leaks and deteriorating suspension her car was suffering from as well. The $5000 in surprise work was not a pleasant revelation, and she’s not sure what to do. “This could be a down payment on a new car,” she states with a hint of plaintiveness. “What should I do?” she asks as she looks at me.
It’s a conversation I have a few times a week. Sometimes it’s a no-brainer, and the car should be trashed, but more often it is unclear what the right answer is. One thing is sure either way, and that is that when it comes to any car, you’re going to have to deal with significant expenses. The real question is how much, and when.
There are a number of benefits to abandoning your old car in favor of a replacement. It is emotionally satisfying for most of us to get an expensive new toy like a car, if it comes with a good warranty it can relieve the stress of repair costs, the predictability of a monthly car note can feel better than the random infliction of a repair bill, and it is easy to secure financing for a car purchase.
The downsides are obvious: financing a car is an added expense, and sometimes it is downright extortionate. Most car purchases these days are for used cars, and the average age of those cars is 5.5 years old. Cars of that age lack the benefits of new cars that would require little maintenance due to their age. While many used cars are sold with an aftermarket “warranty” (which is actually an insurance contract against the need for repairs), those warranties are usually minimal in what repairs are covered and the out of pocket expenses can still be significant.
Ultimately, most people are going to end up spending around $530 a month for a used car purchase over a period of more than five years. Add in the yearly cost of maintenance on a car that’s over half a decade old at around $1000 and the cost of an extended warranty plan at another $1200 per year, and you’re looking at average spending of $8560 per year before you even consider the higher insurance costs for younger cars and fuel expenses as well. By comparison, the average out of pocket expense for repairs on a car that is over 15 years old is about $2500 a year. By comparison, that’s literally less than a third of the financial burden.
Yet, there are times when one absolutely shouldn’t repair their car, even if it is the financially wise choice. Firstly, there are some cars with such a poor reputation for reliability that repair becomes too risky. It makes no sense to fix a car that is likely to fail in a similar, major fashion in the near future. Also, while financing for repairs is available, the available loan amounts are typically less than the cost of repairs for many people. There’s also the emotional component! Some people dislike their vehicle, or find randomly spending money on repairs to be more stressful than the alternative, so they’re willing to buy an actual newly manufactured car, even if it comes at a significant premium. Finally, I have to acknowledge that newer cars are in many ways superior in safety, mileage, and creature comforts.
At AAMCO, we’re happy to talk to you about your situation and steer you in the right direction. Give us a call or stop in to our Madison location.
