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Your financial situation is a major factor when debating between repairing or selling a car.
If your car has a lot of life left and a good value, repairing it is likely a good decision.
If your car isn't worth the cost of the repairs, you might be better off selling it.
An estimate for car repairs can cause its own form of sticker shock. And when you’re looking at a quote for $2,800 just to keep your car running, trading it in for a newer model with fewer issues might seem like a good solution.
But you're likely to come out ahead — at least financially — by fixing old faithful. There are, however, other important considerations when deciding whether it’s time to say farewell.
Calculating the breaking point for value
If you’re debating if it’s worth it to repair your car, consider the value of the car. Depending on what needs to be fixed and how much it’ll cost, you could be looking at investing more money in repairs than the car is worth.
Most dealerships and online retailers that are going to turn around and resell your vehicle can repair issues more cheaply than you can. This means that if a repair shop quotes you $2,000 to repair your air conditioning system, the value of your car doesn't automatically drop by $2,000 if you don't repair it. If you need repairs but plan on getting a new car soon, you might come out ahead if you skip the repairs and trade in your car as-is. Go ahead and get a trade-in offer to see how much your car will fetch before you invest in repairs, especially if your car already has a low value.
However, if you can’t afford to buy a different car to replace the one you have — and you must have the car to get around — you’ll need to get the repair regardless of how it compares with the value of your vehicle.
Estimating the life of your car
Some cars are designed to last longer than others, and how well you’ve maintained your car has a big impact on how long it can stay on the road. If you’re driving a car that’s less than 12 years old and is within its first 150,000 miles, it likely still has some life left in it if you’ve kept up on its maintenance. Depending on the car’s value, repairing it might be worth the money to keep it going for a few more years.
However, most modern gasoline-powered vehicles will start to struggle after the 200,000-mile mark. Electric cars can usually make it up to 300,000 miles before they’re considered well used. If you’re driving a vehicle that’s past these milestones, it will be difficult to know how much life you’ll get out of your car, even if you make repairs.
Financing repairs or a car payment
If your financial situation is keeping you from getting your car repaired, you have a few options to consider.
If you decide to have a mechanic fix your car, you’ll likely need to pay for the parts and labor before you can get your car back. Some larger auto shops offer financing to let you pay off the work in installments. If that’s not an option, you can apply for a personal loan through a lender so you can make monthly payments instead of paying for the repairs all at once. You can also consider other hardship financing options.
If you decide that your car isn’t worth the cost of the repairs but can’t afford to purchase a new or used car with cash, you can also apply for an auto loan to finance the purchase of another car.
Selling your car
If you decide to sell and want to get the best value for your car, you have a few options. The traditional route is to sell directly to a dealership, which gives you a little room for negotiation. However, dealers will need to turn a profit when they resell your car, so you won’t get the car's full value.
If you’re looking for a faster option, consider selling your vehicle to an online retailer like Carvana or AutoNation. They usually give you an instant offer online, and you can arrange for them to pick up your vehicle from your home. But there’s no negotiation room with online retailers — and they can lower their offer once they’ve inspected your vehicle. They also will want to resell the car, so you’ll be looking at an offer similar to or slightly higher than that of a dealer.
If you’re looking to get the most money out of your vehicle, selling your car as a private party is the way to go. Because an individual isn’t likely to buy the car just to resell it, you'll probably get a higher price. But you’ll need to do the legwork to advertise your vehicle, vet the seriousness of potential buyers, and watch out for scams along the way.
Paying for a new car
Buying a new car comes with a variety of costs that can impact your budget more than you might expect. Before signing on the dotted line, ensure that your finances can cover the potential cost of not only buying a new car but also maintaining and driving the car.
When purchasing a new vehicle, be prepared to shell out money for more than just the purchase price. New cars come with fees that can quickly add up, including:
Sales tax. The amount you’re charged depends on your location, but expect to pay over $1,000 for most cars in most states.
Vehicle registration fee. This fee registers your vehicle with your state so it's legal to drive. The amount of the fee depends on your location.
Documentation fee. Dealerships can charge you a fee for preparing paperwork and the sales contract. Fees will vary from dealership to dealership.
Insurance. Newer vehicles often come with higher insurance premiums because the provider will have to pay more if there is any damage to the vehicle, and the risk of theft may be higher, depending on the vehicle.
If you’ve already paid off your current vehicle, financing a new car means you’re adding a monthly payment to your budget. This is also true if you buy a used car. While the price will likely be lower than that of the current year's model, any vehicle purchase comes with costs.
Downsizing to a cheaper car
Just because you’re thinking of trading in your vehicle doesn’t mean you have to buy a newer or more expensive car. If you’re looking to save money while still owning a car, consider looking into a used car or one that is a step down from what you currently own.
Do you really need all of those bells and whistles? What about leather seats? Can you survive without satellite radio? If having a looser strap around your finances sounds like a better option, think about selling your car to avoid the repairs and buying a cheaper car to replace it.
Signs you don't need a car
Another option is to get out of car ownership altogether. If you have other transportation options and don’t drive your car as much as you expected, getting rid of your car could save you money on annual maintenance and insurance. Here are a few signs that you could go carless in the future.
You don’t drive your car much at all. If you’re working from home and find yourself walking or biking to nearby locales, your odometer probably isn’t getting much action. Yet no matter how little you drive, you’re still making the same car payment and paying for insurance coverage.
You have other transportation options. Living in an area where you have other options for getting where you need to go means you can consider cutting ties with your car. Many people depend solely on public transportation in cities where it is readily available, and bike-friendly cities offer a healthy alternative for getting around. If you need to make the occasional longer trip, you can look into taxis or ridesharing services, car-sharing services like Zipcar, or car rental companies.
You have better uses for money spent on your car. Driving can be a big expense, especially in areas where gas is expensive, highways charge tolls and parking is rarely free. If your finances are hurting, letting go of your car could allow you to rededicate that money to other things like buying groceries or paying down debt.