Should I Buy New or Repair My Vehicle?

Perhaps you have found yourself asking this question in the past when dealing with an auto repair on your vehicle. Is the price of the repair too much when looking at what the vehicle is worth? Would you be better off to trade in the vehicle on a new model? This article dives into the math and sense behind “fixing” or “letting it go”.

The first question you should ask yourself is, “Do I feel confident about the quoted repairs to fix my car?” As I have mentioned in other articles, you should know and trust that your automotive service facility has your best interest in mind. If this is a concern for you then you need to find a facility where you do feel this way. Once you are confident about the quote to the repairs you have received, you can continue on.

So let’s look at a scenario that can be used as an example. You own a 2012 Chevrolet Silverado and have been quoted $5000.00 to repair the transmission and exhaust. Should you sell the vehicle or do the repairs? The first question to ask yourself should be, “what is the vehicle worth in a dollar value?” This fictional truck has 220,000km on it, the body is in good condition, and it is paid for. After some auto trader and kijiji research, you will find that running and driving trucks like this are selling for approximately $12,000.00. Without an operating transmission and with a leaking exhaust, the value drops significantly.

The next question you should ask yourself is, “what is the vehicle worth to me personally?” This question isn’t about the dollar value; it’s about how you feel about the vehicle. Do you enjoy driving it? Are you happy with the interior? Does it do everything you want/need it to? If you answered no to any of these questions, you begin the battle of deciding if dollars trump your personal wants. If you answered yes to the questions, you’re well on your way to fixing the vehicle.

If you decide that you are somewhat dissatisfied with the vehicle, you should begin to look into replacements. Vehicle shopping when you are forced to buy something in a hurry is much less fun than when you have time to do some research. In this case, the research is well worth your time. Let’s look at some of the options you are presented with.

We said earlier in the article that this truck (with similar kilometers and overall condition) is selling for approximately $12,000.00.  If you were interested in buying a similar truck, you would be buying something that could require similar repairs within a year or two. That doesn’t sound like a smart financial decision; however you could gamble and see how a used vehicle purchase treats you. In this case I would state that $12,000.00 versus $5000.00 is a no-brainer. You should fix the truck.

So what about a new or slightly used vehicle purchase? Some visits to dealerships would let you know approximately what a newer truck is worth. These trucks with less than 50,000km are selling for $50,000.00 and up, depending on the trim packages. If you found a truck you liked for $50,000.00, most of us would be putting it on payments. So let’s look at the cost of paying for that truck over 7 years. With current interest rates you will most likely be paying approximately $625.00 monthly if you put 0 dollars down. After the 7 years is up, you would have a paid for truck with approximately the same mileage that you have now.

So let’s break this down a little bit further, and please note that these numbers do not include inflation.  The new truck would have you spending approximately $7500.00 a year on payments plusmaintenance. The maintenance costs on a newer vehicle per year will differ from every vehicle, but most likely you will spend no less than $7000.00 over 7 years. This means the new truck will cost at least $8500.00 per year.

In comparison, your current vehicle will not cost you anything per year in payments. Most likely the maintenance costs will include some more expensive bills, so we will figure that over the 7 years left of the vehicle’s life you will pay approximately $30,000.00. This means you would be paying $5000.00 yearly if I add the current bill of transmission and exhaust repairs.

So who ends up further ahead? The version of you that bought a new vehicle or the one that completed the repairs? The new vehicle buyer after 7 years is left with a vehicle worth $12,000.00. The version that completed the repairs is left with a vehicle that is ready for the scrap yard; however the yearly costs saved them $3500.00 a year. Those savings add up to $24,500.00 after the 7 years!

That is the math and sense behind “fixing” or “letting go”. Every situation is different and obviously vehicles have different values. Another factor to consider is if your vehicle is known to have other expensive repair issues or an upcoming issue. Your automotive service facility should have the answers to these questions and be able to give you an accurate report on your vehicle’s condition. As always, if you have any of these questions about your own vehicle we would be more than happy to go over your options with you and help you reach the best outcome for you.

Article by Tony Martin