Should You Repair Your Car or Replace it? How to Know for Sure

If you’re a car owner, at some point you’ve probably been faced with the gut wrenching decision of whether to repair your car or replace it.  It’s rarely an easy decision to make.  Repairing vs. replacing your car can have huge financial consequences that last months or even years.

In today’s article I’ll show you what you need to consider when deciding to repair your car or replace it .  It’s usually not a clear-cut decision, but when you’re armed with the right knowledge, figuring out a game plan is much easier.


Repair Your Car or Replace it ?

So it seems like your car has been in the shop more than it’s been in your driveway.  You’re getting tired of sinking money into your vehicle for repairs, but you’re not sure if you should repair your car or replace it .

So what do you do?

Does it make sense to keep repairing your car?

Should you just sell it for what it’s worth and get another one that’s (hopefully) in better shape?

When you’re trying to figure it all out, the first thing you need to do is break out the calculator and do a little math.

When you get the numbers into perspective, it gets a little easier to make a final decision to repair your car or replace it .

Once you run the numbers (I’ll show you how), I’ll also show you some great tips for how to save money for your next car or the repairs you’ll need.


It Depends on Your Situation

One thing you should know- the numbers usually don’t tell you 100% for sure whether to repair or replace it .  But they will give you a solid guide to work from that helps make an informed decision depending on your situation.


Determine the Value of Your Car + Repairs

So here’s where the math comes in.  The first thing you need to do is figure out how much your car is worth if you don’t get it repaired and how much if you do.  You can find out estimated values for your car on websites like Edmunds or Kelley Blue Book.

Next, find out how much it will cost to repair your car.

Once you know those two numbers, you’ll then need to get an idea if the value of the car + repairs is worth it.


Getting EstimatesShould Your Repair Your Car or Replace it- How to Know for Sure 1

For instance- let’s say you get on and find out your car, as is without repairs, is worth $8,000.  You also find out there that if your car is in good running condition, it’s worth $9,000.

Your mechanic tells you the repairs will cost you about $2,000 to fix.

Next, ask your mechanic if he thinks the $2,000 repairs will add $2,000 of value back to your unrepaired car.  He should be able to at least give you an idea if he thinks the repairs will be worth it.

Once you have an estimate from your mechanic and info on what your car is worth repaired and unrepaired, then you can make an informed decision on whether you should repair your car or replace it .

If the repairs don’t add enough value back to the car, you might want to consider selling and use that money toward another car that’s in better condition.


Should You Repair Your Car or Replace it?

In this example, if you have an $8,000 car (without repairs) that requires $2,000 of work but will only be worth $9,000 after the repairs, you might want to consider selling the car as is for $8,000 and use the proceeds to buy another vehicle that’s in good running condition.

But if you determine that your $8,000 car + $2,000 in repairs would result in your vehicle having a resale value of $10,000.  Then it might be a good idea to keep driving the car for now.  When it comes time to sell it later, you’ll still be able to recoup the value of the repairs.


Something Else to Consider When Paying for Repairs

Of course, the scenarios above are not the only things you need to consider.  If you’re constantly late or missing work because of your unreliable car, the hassle of dealing with it might overrule the numbers.

At a certain point, the time, money, and frustration are just not worth it, so you have to take those into consideration when deciding whether to repair your car or replace it .


Upside Down on Your Car Loan? Here’s What You Can Do


You Decide to Fix the Car- What’s Next?

So you’ve taken all the numbers and other factors into consideration and decided to fix your car.  What’s the best way to go about getting your car fixed?  What if you don’t have the money to pay for repairs? Here are a few handy steps you can follow to make sure you have the money to get the repairs you need.


Get More Than One Estimate

If you have an established mechanic that you know will always give you a good price on repairs, you may not need to get several estimates.  But if you don’t have that relationship, it’s best to shop around.

Ask your friends and neighbors who they use for car repairs.  If they know someone who is trustworthy, they will be glad to recommend them to you.  If you get an estimate at a dealership, try to negotiate the price and ask if any discounts are available.  Dealerships usually have more wiggle room with their pricing.


[tweetherder]Should you repair your car or replace it? How to know for sure- [/tweetherder]


Can You Fix it Yourself?

If you’re handy and know how to tackle some car repairs, you’ll save a ton of money doing it on your own.  However, make sure you know what you’re getting into before you get started.  If you don’t know for sure what the problem is, you can spend a lot of money on parts you don’t need (Yes, I’m speaking from experience!).


Can the Repairs Wait?

Some repairs that aren’t absolutely critical can wait awhile.  If you need new brakes or an alternator you won’t be able to wait.  Items such as power windows or broken a/c can wait a while if needed.

My son bought his first car (with cash!) last year and the a/c wasn’t working.  He had to make a few critical repairs first, so he had to put off getting air conditioning this summer. It’s been a hot summer for him, but he won’t be going into debt to fix his a/c!


Check Your Budget

If you’re not doing a written budget for your finances, this would be a great time to start.  When you know where you stand financially, it’s easier to figure out where get the money you need for car repairs without resorting to credit cards or other types of debt.


Shift Your Money Around

If you still don’t have enough money to tackle the repairs, you may have to cut back on a few things.  That means restaurants, new clothes, and savings might have to take a back seat so you can pay for car repairs.

If you have an emergency fund available, you can use that too.  Just make sure to replace the money you use so your emergency fund is fully stocked when you need it again.


Save for Future Repairs

You’re always going to need the occasional car repair.  However, most people get caught by surprise when the need for car repairs arises.  Then they have to scramble to find the money (or worse, go into debt) to get the repairs done.

To make sure this doesn’t happen, make car repairs a line item in your budget every month so you’ll have the money available when you need it.  Then you won’t have to stress out and scramble to find the money.


What if You Decide it’s Time for a New Car?

What if you’ve looked at all the facts and decided it’s time to buy a new car instead of fixing your old one?

This is where you need to be careful!

At this point it’s extremely easy to get “new car fever” and head down to the nearest dealership.  But hang on a minute, that’s a quick trip to getting a $500 a month car payment if you don’t think about what you’re doing!

A new car’s value drops like a stone, losing more than half its value in the first few years.  Combine that depreciation with all the interest you’ll pay on a car loan, and you find that buying a new car is a terrible deal. Let some other sucker take that hit!


What About Leasing a Car?

Leasing a car will usually get you a lower monthly payment than buying new.  However, it’s an even worse deal than buying a new car!

Let’s say you get a $350 a month lease for 5 years.  Sounds like a pretty good deal right?  It’s cheaper than a car payment and you’re not paying all that interest you would if you had borrowed money to buy it.

Here’s the deal- over that 5 year lease, you would pay $21,000 for the privilege of driving someone else’s car.  At the end of the lease you turn in the car and have nothing to show for it but an empty wallet!

Also, if the car shows excess wear and tear or you go over your allotted mileage, you’ll get stuck with a hefty bill.

Leasing is the most expensive way to drive a car, and according to the numbers, it’s the worst.

Leasing a Car vs. Financing- Which is Better?


Buy a Solid Used Car With Cash

If repairing your car isn’t worth it and you decide to replace it, I recommend selling your old car and using the proceeds (along with any cash you have saved) to buy a solid used car.

This scenario has plenty of advantages:

  • You’re paying cash instead of paying interest on a depreciating hunk of metal.
  • No monthly payments!
  • You own the car outright.
  • Since you have no payment, you can save money for repairs and to purchase your next car when the time comes.

Just because it’s a used car doesn’t mean it has to be a crappy car.  There are plenty of awesome high quality used cars available at a good price.

Angie and I have been driving used cars, paid for with cash for about a dozen years now.  Sure, we have the occasional repair bill, but it sure beats the heck out of having a monthly payment!

Going into debt for a car isn’t necessary and it’s just not worth it.  Every car is eventually going to need a few repairs.  If you have a car payment and have to pay for repairs too, that really stinks!

Whether you repair your car or replace it , just make sure you consider all the factors and don’t make decisions out of emotion.  Emotional decisions will bit you in the tail every time!

I wrote an article a few years ago on how to pay cash for all your cars for the rest of your life.  This is the same technique we used and it just flat works!  It’s not hard to do but it might take some patience.  Click the link below to read the article.

How to Pay Cash for Your Next Car- Even on a Low Income


This article originally appeared on the Celebrating Financial Freedom blog

About Dr. Jason Cabler

2 Responses to “Should You Repair Your Car or Replace it? How to Know for Sure”

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  1. Great rundown of what to do when you need your car repaired! We have been big fans of buying cars with cash, I’m really glad you added that tip!

    One thing I have seen family members do is sell their car for scrap metal/parts when the car is really done. It won’t pay much, but it puts a little in your pocket if your car is dead and will not sell otherwise.

  2. Absolutely fantastic point. There’s only so much math and rationalization can do for you – but if you freaking love your car? You know what you have to do.

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