When your car starts to get a little older, it is common to ask, “Should I get a new car?” This question gets asked out of the concern that the repair costs are going to increase. To help you make that decision, ask yourself: “Do I like my car? Am I comfortable with it?”
I STILL LIKE MY CAR!
If you like your car, but are considering moving on for financial reasons, let me point out that the best way to come to this decision is to calculate your cost of ownership per year. A typical car as it hits the 100,000 mile mark will need between $500 and $1,800 worth of repairs/maintenance. Then each year beyond that, when averaged out, figure about $300 to $800 in repairs. Of course, as the mileage gets higher (over 200,000) you can expect those numbers to go up a bit (about 20%). Sounds like a lot, but bear in mind that the average new car depreciates close to 20% the first year and about 10% each year after that (until the 5th year). You’ll also be paying sales tax on the purchase price, plus adding $200 or more a year to your DMV registration costs (not to mention increased insurance cost). When you take into account these costs, things start to come into perspective. In most cases, it makes more sense to maintain your current vehicle.
I WANT A NEW CAR
Start putting thought into what kind of car you would like to replace it with and decide on what your budget is. An alternative is to buy a newer used vehicle. The best value to depreciation ratio is at the 5 to 6 year old mark. If going this direction, it is best to find a car with less than 60,000 miles on it. You will also want to look for a car with a “clean” title, not a “salvage” title.
Lastly, have it inspected by a reputable shop. With this option the costs that need to be calculated is the difference between what you sell your car for, and the price of the one you are buying (probably several thousand dollars), sales tax on the purchase price, and an increase in the annual registration fees. The downside of this option is that in 3 to 5 years you may be faced with the decision again.
Our conclusion is that it can make a lot of sense to stick with the car you currently have. Make sure you do the scheduled maintenance, and repair it as the need arises. Keep all your service records for when you will eventually sell the car, as this helps the buyer feel more comfortable to know the repair history of the vehicle.
* The following article pertains to those who live and drive their car where it does not snow.