These warning signs should scream danger and prompt you to walk out of the dealership without that new car, according to Adam Shell.
It sounded like a yak had taken residence in my garage.
In their respective driveways, my neighbors’ heads immediately turned toward the chaos to see what was wrong. I took a deep breath, and slowly backed my 15-year-old car, with 200,000 miles on it, out of my garage, fresh off its primal scream.
“I think it’s time,” I said to my wife as we sunk down in our seats after making our way onto the street.
My philosophy has always been to pay cash for a lightly used car, then drive it until the doors fall off. But the tough part is determining which repair should be the last before switching cars altogether. Holding onto a car and driving it until it dies can be a practical approach to limit transportation costs — until it isn’t. At the snap of a belt or the crack of a valve, your reality can change in a very bad way.
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How long should you own a car?
What makes this decision point frustrating is a car, in most cases, is a depreciating asset. It’s worth less with each passing mile, and sinking money into something that is diving in value can seem ludicrous. It’s quite possible you’re driving a car with a value close to nothing. Yet the fact that it still works reasonably well makes it very valuable to you. But this is where things can begin to go wrong.
The advent of YouTube has helped drivers get more miles out of dying cars because many “simple” repair videos are available. An $8 part combined with a seven-minute video and two hours of work can save someone hundreds if not thousands of dollars. This doesn’t change the reality of having an expensive part break or the need for an expert-level fix.
Is buying a new car worth it?
There are a number of reasons you might want to consider ditching your older car for a newer one, and the reasons aren’t always limited to repairs. For instance, if your older car gets 20 miles a gallon and a newer car gets 35 miles, then the savings on fuel alone may make the switch worth it, especially if you are a high mileage driver. At $3 a gallon for a 30,000 mile per year driver, a more fuel-efficient car offers roughly a $2,000 annual fuel cost savings.
When considering a car change, take the time to determine what it really costs to drive your car over the course of one year. This includes fuel, regular maintenance like oil changes, and the very tough to quantify category – repairs. Draw a line in the sand by setting a dollar amount which would trigger the need to get a different car. For example, putting $4,000 of repairs into a car worth $1,500 doesn’t make a ton of sense, especially if you’re going into debt.
The next step is to determine what you have at your disposal to solve the problem. In other words, do you have discretionary income available or any money saved? And if you need to borrow, is your credit up to the task?
You’ve essentially got three options: Buy a lightly used car, buy a new car, or lease a new car. If you’re forced to buy a heavily used car to replace your heavily used car, then you may risk more unknown, involuntary repairs.
The moment you conclude that your car is worth nothing monetarily but very valuable to your financial life, you must begin to craft a plan to solve the problem on the horizon. Start making room in your budget for a payment, especially if you don’t have any more saved. Is this easier said than done? Of course it is, but that doesn’t mean it’s not the appropriate course of action.
Peter Dunn is an author, speaker and radio host, and he has a free podcast: “Million Dollar Plan.” Have a question for Pete the Planner? Email him at AskPete@petetheplanner.com.
The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.
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