Old Cars For Sale
or When to Throw in the Towel
So, you’ve been driving old “Betsy” for three years without having to invest in any costly repairs. Even better, you bought her used for a song. Okay, she’s not a head turner and doesn’t do much for your reputation as a man about town. But, the dinners out and cool vacations were only possible because you had no monthly car payment, not to mention only negligible insurance costs. It’s all been good, until now.
Betsy has a problem and it sounds like it could be costly. Is it time to bite the bullet and purchase a new car? Maybe this repair will buy you another year or so….or maybe Betsy, like all older cars eventually do, will turn into a money pit? It’s hard to tell and making the decision to pay for the repair or invest in another car can be a difficult one, especially if your finances aren’t in the best of shape. What’s the smart thing to do?
Most experts agree that it is almost always cheaper to repair your used car instead of buying a new one. However, you need more information before you can make a solid financial choice.
1. For example, how much is your car worth? Kelley Blue Book online is a good place to start to determine your older car’s value.
2. Next, how much will the repair cost? It’s best to get at least two or three quotes on the cost of the job. You can call mechanics or dealers in your area and ask them for a quote. They can generally come pretty close without seeing the car as long as you know what is needed. You can also try one of several online quote services, like RepairPal to get estimates. Be especially aware of the labor rates since these are more likely to vary than the costs of parts. If you don’t know what’s wrong, you may have to pay for a diagnosis. (Most repair shops will not charge the diagnostic fee if you eventually have the work done there.)
3. Next, what would it cost to replace it? Let’s presuppose that you'd buy a new car that's a similar make and model. Based on averages, there’s a pretty good chance that it will cost at least $20,000 and possibly a lot more. Check online to find the cost of new model. Then, take advantage of the monthly payment-calculators, found online, to find out how much your monthly nut is likely to be.
Once you have these three numbers, you are better equipped to make a smart financial decision. A good rule of thumb to decide when it's time to throw in the towel is if the cost of repairs is greater than either the value of the vehicle or one year's worth of monthly payments.
So, if the repair cost significantly exceeds your car's value, it is probably best to replace your old car. From a financial standpoint, it's most sensible to replace the car with a newer, but used, car to avert the enormous depreciation that occurs as soon as you drive off the lot. It's also a good idea to sell your old car to a private-party. You’re more likely to get top dollar. (Do be sure to fully disclose the repair that needs to be completed if applicable.)
Lastly, if the required repairs are more or less equal to the value of your old car, it makes better economic sense to repair Betsy rather than to buy a new car. This is because even the most costly repairs would most likely only equal about a year of car payments on a new car.
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