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Economics of Repairs vs a Newer Car

mechguy

mechguy

Poppin 'em thangs
The old paradigm of car replacement vs maintenance and repairs: From a pure economic standpoint, at what point do you abandon ship considering the potential repairs and just buy something newer?
 


IMO, if you gotta put in as much as $500-$800 in maintanince every year that's still less then the depreciation of a new car. Never buy new.
 
If you do your own work it really comes down to two things.
Is the body still in safe condition
Can you get the parts to fix the problem.

If you have a mechanic do your work I could imagine a 2k trans replacement might send someone looking for a new car.

I feel too it can be a feeling of "I'm done with this car."
 
i work at a dealer and most of the time if the we write a 3-5k estment on a car and the body looks ok then sales when go steal them and the customer will end up trading in the car. so from a dealer stand point i can understand this and i just sold my gp because the trans was starting to let go and i wasnt going to replace it.
 


You have to look at it this way.
$400 a month for a car payment, so 4800 a year for 5 years. After 3 years maintenance on a new vehicle becomes a possible cost.
For your current car no matter what it is, maintenance will not even be close to that if you blow an engine, transmission, rack ball joints and tie rods all in 1 year and need to do the brakes with pads and rotors you might come close.

The issue alot of people find is based around the Sunk cost fallacy, looking at all of the money they have put into a vehicle and then somehow using that thought to justify buying a new one. i.e. "this car keeps nickle diming me to death". If you complete all repairs properly they should be fixed for the long-term, therefore your past investment into your vehicle should not influence any future decision making.

so 4800+ a year for a new car and the really expensive insurance, or maybe $1000 in maintenance for a used car owned outright. My personal route has been to stash $2000 for a winter beater every year and sell it on in the spring to make my money right back keeping my GP nice, I'll probably keep it forever as long as it doesn't end up as a mangled wreck somehow.
 
How anal are you about cars?

If you're like me, then a BRAND new car would be the only option.

Even then, payments of 600-1000/month are kinda high.

You can fix a lot of crap on your car for that.

It comes down to rust. If its rust free, go ahead, if its starting, start holding back and considering other less rusty options.
 
LOL I think this guy may have too much common sense for this forum

I agree with every bit of this ^^^^^^
Driving around through car lots today myself I find it very umimpressive what even 10k gets...........
 


ill take a car thats paid for with a little rust over damn payments every day. I can fix rust and I can only make so much income per month.............. screw payments rust is repairable too
 
Then you can start getting into the differences with newer vehicles and fuel economy, which is crazy I was just talking to a friend with the new Regal GS, for a 4 cyl car in our class he only gets about 22 mpg's combined, which is crazy because my ancient 3800 still does better. But I guess if you wanted better fuel economy you could get a prius, but then I'd probably just point you towards an older civic or a geo metro and tell you to have fun.
 
There are several factors. How reliable is your current car? Has it left you stranded more than once in the past year? How long is it down for when it is down?

When I bought the Grand Prix I didn't have a car payment. I own my Stealth free and clear. It just finally got to the point where I didn't want to have to depend on the Stealth for daily driver duties anymore and that meant I needed to buy newer.

I think I made out good though. My payment are only $175 a month for 4 years. I only owe about 21 more payments.
 
I bought my car brand new, and feel I can never sell it because its worth so little now. I will just get something else used as a dd to make the GP last because its such a nice car to me.
 
matt5112 said:
It comes down to rust. If its rust free, go ahead, if its starting, start holding back and considering other less rusty options.
Click to expand...

I agree and it's starting to rust. It could still live for a while but will continue to get uglier. Doing even the simplest economic analysis with these details: 3 year term, don't care about interest rates.
Old car: $1000 repairs per year, $4000 current value, end of three year value = $2500
Newer 2007/08 Grand prix: $8000 purchase cost, $500 year in repairs, salvage at year three for $5000.
NPV Old Car = -500
NPV Newer = -500

So approximately even.....
 
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addzradd said:
You have to look at it this way.
$400 a month for a car payment, so 4800 a year for 5 years. After 3 years maintenance on a new vehicle becomes a possible cost.
For your current car no matter what it is, maintenance will not even be close to that if you blow an engine, transmission, rack ball joints and tie rods all in 1 year and need to do the brakes with pads and rotors you might come close.

The issue alot of people find is based around the Sunk cost fallacy, looking at all of the money they have put into a vehicle and then somehow using that thought to justify buying a new one. i.e. "this car keeps nickle diming me to death". If you complete all repairs properly they should be fixed for the long-term, therefore your past investment into your vehicle should not influence any future decision making.

so 4800+ a year for a new car and the really expensive insurance, or maybe $1000 in maintenance for a used car owned outright. My personal route has been to stash $2000 for a winter beater every year and sell it on in the spring to make my money right back keeping my GP nice, I'll probably keep it forever as long as it doesn't end up as a mangled wreck somehow.
Click to expand...



although i understand where you coming from and i also understand how great of an idea that may be you also have to remember that most $2000 cars also come with plenty of repairs needed in order to be safe/reliable...... where you live that may be a simple task and im only speaking on my personal experiance along with what ive seen available around me in that price range........ i also have a bit of a diff commute. i drive 150 miles a day round trip, so feeling confident that my $2000 car will get me to and from my destination and home without any hiccups or issues isnt exactly the best for me. however if your driving 20-50 miles round trip a day that might be exactly what you need but dont forget the initial costs to get the car safe... brakes, rotors, tuneups, fuel pumps, filters, bearings, fluids, ball joints, bushings, belts, pulleys etc....



as everyone knows when you buy a used car the rule of thumb is that your buying someone elses problem. reguardless of what may be wrong with it whether it be minor or major its still something that requires additional money to fix, new cars are not by any means worth the rediculous price they are asking for it now a days especially when the insurance to cover them to the banks standards doubles your monthly payment as apposed to a car you own outright. i love my grand prix treating it right in the city and on the highway averages me roughly 25 miles to the gallon which is plenty for me. if i wanted something great on fuel i would have bought another diesel (example.... a tdi jetta or something similar or another ram with a cummins) it really comes down to the owner and what they plan on using the car for, if they want something to be street and strip and get them to and from work reliably day in and day out then maintinace is the biggest factor, all cars require the same maintenance, the cost of those parts differ greatly depending on ur application high end cars require high end parts and just because a car is common or cheap to begin with doesnt mean that the repairs follow the same suit.



in the end it really all breaks down to the same...... a newer car is going to require the same wear and tear maintenance as an older car however a newer car will also require higher insurance and the parts (if its brand spanking new) will most likely only be available from the dealer ( and we all know how insane their prices are) however a used car that you own outright that you bough for $2000 is probably high milage, meaning that there are alot of things that have worn out and need replacing but were overlooked by the previous owner which adds up when your looking to make it safe and reliable. like i said earlier when buying a used car your buying someone else's problem...... there was obviously a reason that the previous owner wanted to get rid of it instead of fixing it and they 99% of the time never tell you EVERYTHING thats wrong with it.

if your comparing the out of pocket costs of fixing an old/used car as to purchasing a new one you have to realize although a newer car may be cheaper than fixing your transmission from the start ( lower down payment compared to trans cost) your overal costs are going to be much higher, and god forbid something happen to that new car that requires the insurance company to get involved. now your talking about higher premiums or the inevitable drop from their coverage. it really all breaks down to how capable you are for your regular maintenance and how skilled you are at examining a used car before you commit.


this is all my own personal opinion and based off of my own personal experience.
 
One solution would be to find ways to make more money and not worry about the small differences in life. Its really not that hard to try and generate the difference in income between owning something new and the maintenance of something used. Just a different perspective.
 
dpzelenak said:
i work at a dealer and most of the time if the we write a 3-5k estment on a car and the body looks ok then sales when go steal them and the customer will end up trading in the car. so from a dealer stand point i can understand this and i just sold my gp because the trans was starting to let go and i wasnt going to replace it.
Click to expand...


Wow! Could you have made that post even more clear?
 
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