Is It Better to Repair or Replace Your Car?
Whether you repair or replace your vehicle, the costs of car ownership are invariably rising. According to a Jan 2022 report from Kelley Blue Book, average car prices surpassed $47,000 by the end of December 2021. Even those previously thought of as smart buys, such as Hyundai and Kia models, had 2021 transaction prices 18% higher than the manufacturer's suggested retail prices, depending on the model.
The pandemic has been no help. Global part shortages have affected manufacturing, leading to limited supply and increased prices. Not only is purchasing a brand-new car tough right now, but the costs to maintain the one you already have can easily add up. Never mind the routine oil or brake pad changes, any significant repairs on an outdated car can cost upwards of hundreds of dollars and long wait times.
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So, how do you know which option is right for your budget? Here's a three-factor cost-benefit analysis to help you make the best decision for the long haul.
What is the year, make, and model of your car?
Just how old is your current car? Knowing the year, make, and model allows you to estimate the cost of potential repairs and find comparable alternatives available on the market. The owner's manual in your vehicle is an excellent resource to consult for routine maintenance advice and to glean your car's specs. Using your car specifications, such as length, width, and wheelbase, you can get an idea of what comparable repair costs might be.
Check online tools, like Kelley Blue Book's Fair Repair Range,' to estimate the reasonable cost of repairs and the current trade-in or retail value of cars like yours. Use the "50% rule": When repair costs exceed 50% of your car's current worth, it's best to replace it.
Does your car have trade-in value that would help defray the cost of a replacement?
Once you know your car's value you can determine whether it's worth trading in to a dealership or selling it privately. Both routes can offset the costs of a new purchase. A plethora of online tools exists to help you figure out what your car's worth. Consumer Reports, Kelley Blue Book, Edmunds, and Autotrader will give you that key dollar amount.
It is important to do research into what kind of car you need before deciding to trade in your old one for a new or used car. If you decide to trade-in your car at the dealership, know the car's worth and don't settle for less. If you have a model and make in mind for your replacement, ask directly if the dealer can make such a swap work. Also, try online sites, such as Craigslist, that allow you to negotiate directly with a willing buyer. The key to making this plan work is already knowing the price of your next car—before you agree to sell your current one.
Do you have time to wait?
There is always an unfortunate time lag, regardless of your decision. If you opt for that new car, it can take up to 12 weeks to be parked in your driveway. It could take even longer to import a foreign-made vehicle, resolve complicated financing, or finalize a trade-in. Given the semiconductor computer chip shortage, a new car takes longer than normal to arrive. But, if your car is behind many others also waiting for parts and repairs, then you're always counting down the days.
Time is a major factor to consider when deciding to replace or repair a car. Think about how long you can feasibly go car-less or take alternative transportation methods. Barring any significant price differences, let your calendar decide whether a replacement or repair will more comfortably meet your deadline. In that case, the car that is of the most value is the one that is both reliable and available when you need it.
Bottom Line
Although the decision to repair or replace a car can be driven by emotion, it really should be based on facts. Research current resale values and repair costs, so your cost-benefit analysis is clear. Given current labor and manufacturing shortages, consider how changing your time horizon might also change your price point.
