I am retired and not wealthy. I am a senior citizen who has experienced mass layoffs, recessions and health issues, and there was no such thing as inheritance in my family. I have to be careful about purchasing a car. I have a very reliable 2012 four-door sedan that is paid for. It is gasoline-powered.
My car has 65,000 miles on the clock and is in need of $3,500 in repairs, and closer to $5,000 to bring it to top condition. The trade-in value before the repairs is about $6,000. Also, the steering is not as precise as in higher-end cars, and the car rolls backwards slightly at the top of a steep hill before moving forward.
The prices of the new cars are much higher than the prices eight years ago.
If I spend $3,500 or more on repairs, the car still wont appreciate in value over the next few years. I am also extremely aware that electric cars are already replacing gasoline cars. I would have to pay high interest on a credit card to have this work done. In a few years, I will also need new tires.
When buying a car, its easy to forgo budgeting and get in too deep, especially if youre already at the car dealership looking at all the features. Heres how to properly calculate exactly how much you can afford to spend.
The interest rate advertised for a certified used car is 5.9%, which is too high. And the prices of the new cars are much higher than the prices eight years ago. But if I buy a certified used recent model car or a new car, I would have a fixed monthly payment and wouldnt have sudden expensive repairs for an old car.
My current car is economical, but not comfortable, and I am soon going to have hip-replacement surgery. So the right comfort and ergonomics are now also a factor. What is the tipping point for keeping ones old car versus trading it in for a new or certified used car when I am very budget-limited?
Careful Driver
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If you put that $3,500 towards a new car, you will get more time (more miles on the clock) and a more comfortable and safer car. Photo: MarketWatch illustration
Dear Careful,
Two things off the cuff: 1) Your car actually has very low mileage for its age. 2) Electric vehicles are popular, but gas guzzlers are not going extinct anytime soon.
That said, you need a car that suits your needs and will go easy on your body. The repairs on your car exceed 50% of the value of the car, which is one metric used as the tipping point on whether you should spend more money on the car or trade it in. That metric leans in favor of buying a new pair of wheels, but not if it means being overburdened in debt and not if you dont drive this car long distances. The aforementioned tipping point is not the only consideration.
Most 12- to 15-year-old cars would have at least 140,000 miles on the clock. Mileage affects the engine, transmission and suspension; age impacts rubber seals, rusting and electronics. By repairing this car, you are spending $3,500 to get, say, another five years out of it, so its costing you $700 per year to keep it, all else being equal. A $25,000 used car could depreciate by up to $2,000 to $4,000 per year, and even if its a younger car, it may have more miles on the clock.
Putting money towards the cost of a new car gives you more miles on the clock, plus a more comfortable and, arguably, a safer car. The car experts have hard and fast rules: Once repair prices approach or outweigh what you normally pay on a standard auto payment, replacing it is wiser financially, according to HCS Auto Repair in Rogers, Ariz. But are you guaranteed that a $25,000 used car would not have hidden problems of its own? The answer is no.
Putting repairs on credit
If you pay $25,000 for a used car at 5.9% interest over five years, youd pay $475 per month or $5,706 per year, more than the cost of the (initial) repairs. But you would have more longevity in that car, plus greater comfort and safety. If you put the $3,500 cost of the repair on a credit card over five years, at a 20% APR, you would end up paying around $92.50 per month and a total of $5,550, including $2,036 interest, but you would still have the old car (at a lower trade-in price).
Ask if your car has hill start assist. A caveat: The $3,500 may only be the beginning of the repairs for a car. If your cars safety mechanisms have not evolved as much as newer cars, swapping to a car with more safety features might be the route for your health, HCS says. Large engine rebuilds, transmission rebuilds, severe body damage, and complex system malfunctions are all huge red flags in choosing repair options. They are very expensive.
The cost-per-mile is cheaper with the repairs, assuming youll put 50,000 miles on the clock over the next five years. Heres how that breaks down (excuse the pun): 1) Cost-per-mile of $0.15 over the next five years; if you repair your car for $3,500 and pay $800 a year on insurance/additional repairs. 2) Cost-per-mile of $0.32 over five years with $12,000 depreciation and $4,000 in maintenance and insurance if you buy a $25,000 car.
Demand is high for used cars
Theres no escaping the fact that you face a high one-off cost to upgrade. The average price of a used car in the U.S. hovers at around $25,000, and the average price of a new car is nearly double that. Estimates on the increase in the price of new cars due to tariffs range from $3,500 to $15,000 per car, depending on the model. The volume of used cars sold has spiked in recent months due to President Donald Trumps tariffs, according to Cox Automotive.
Demand remains high, especially given that there was a reduction in new cars being built during the pandemic years. Kelley Blue Book says tariffs affect the price of new cars rather than directly impacting the price of previously owned cars. But as consumers trade in the next generation of cars that were purchased after tariffs were imposed, those vehicles will have a premium attached to the price. Now may be a good time to buy and sell.
You need a vehicle that will get you from A to B safely. Modern vehicles come equipped with advanced safety features like lane departure warnings, automatic emergency braking, and blind-spot monitoring, it adds. These features significantly reduce accident risks something your older vehicle might lack. A single brake repair might make sense, but when youre facing multiple safety-related issues, its time to consider a newer, safer vehicle.
Your car has problems, but does it currently suit your needs and your budget? If so, repair it.
More columns from Quentin Fottrell:
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