Repair or Replace?

October 07, 2014

After being towed to the auto repair shop, my stepson got the bad news last week that his beloved 2005 sporty Monte Carlo needs a new transmission.  He can pay $2,600 for a new one or $1,800 for a rebuilt transmission, but either way, the cost of the repair is almost what the car is worth, according to Kelly Blue Book.  No matter how much he loves his car, he’s come to the realization that it doesn’t make sense to dump any more money into a clunker car with over 160,000 miles.  He’s seen a lot of good times in the Monte Carlo, but now as a new dad of a toddler, having a two-door sports car has become a drag. 

Luckily, this time of year is a good time to be shopping for a new car since there are some great end-of-year rebates and incentives for the 2014 models that dealers are trying to clear off the lot. Add that to the GM family discount he can get from his grandfather (who retired after working 33 years at the Chevy plant) along with the military discount, and he should be able to get a good deal on a new set of wheels.  With a little help from his dad for the down payment, he’s decided it is time to replace his broken down vehicle.

If you find yourself stuck on the side of the road, TheCarConnection.com suggests 10 ways to know when it is time to replace or repair YOUR car:

  1. When ongoing repairs and maintenance will cost more than the car is worth, it is time to get rid of the car and get a new one.
  2. Look at potential future repairs and avoid an automotive money pit.
  3. Consider safety since many older vehicles don’t have side airbags, rearview cameras or the electronic stability control that is now federally mandated.
  4. An older vehicle may be a gas guzzler and less fuel efficient than a newer car.
  5. Know what your car is worth and never make a major repair that costs more than 50% of the value of the vehicle.
  6. Estimate what your next car might cost and determine if the new monthly payment will be less than the anticipated outlay of ongoing repair costs and replace your car if the yearly repair bills will be more than 10% of the price of the new car.
  7. Factor in insurance costs since a new vehicle may end up costing more to insure.
  8. Look for rebates and incentives-especially end-of-year closeout specials for a new car purchase.
  9. Does a lifestyle change (longer commute, the need for a car seat for your baby, etc.) require a change in auto style?
  10. You have just had enough of your old car and are ready for that new car smell.

Finally, don’t forget to see how a new car purchase would fit into your overall budget. Before you sign the dotted line for your new vehicle, make sure your car payment, insurance, and operating costs don’t eat up any more than 10 to 15% of your monthly budget. Otherwise, you may find yourself car rich and cash poor.