Repair vs. Buying a New Car

There are some terrific advantages to driving an old car, including cheaper car insurance and owning your car outright. But old cars need repairs, especially those that are five years old or older. So when you are suddenly faced with a costly repair for your old car, does it make more sense to repair it or replace it with a new car?

While it’s almost always cheaper to repair your used car instead of buying a new one, you need more information before you can make a solid financial decision. Find out the answers to these questions:

How much is your car worth? Check the value of your current car at several third-party car information websites such as Edmunds.com, Kelley Blue Book or NADAguides.com to determine what it’s worth, assuming it’s working properly.

What would it cost to replace it? Assume for a moment that if you replaced your old car, you’d buy a new car that’s a similar make and model. Do a bit of research online to determine what the new car would cost. Chances are it’s at least $20,000 and possibly a lot more. Then use Bankrate’s auto loan calculator to estimate your monthly payment.

How much does the repair cost? Get a couple of quotes on the cost of the job. You can call mechanics or dealers in your area and ask them to quote the job for you. They can do this without seeing the car as long as you know what repair is needed. Have them give you the estimate in writing or try an online quote service such as RepairPal to get estimates. While the cost of the parts is not likely to be much different — if it is, ask why — labor rates can vary from shop to shop and you can possibly save some money by choosing a different mechanic.