Fix it or ditch it: Is it time for a new car?

July 26, 2021
Person attempting to fix their car under the hood.

So, your faithful, never-let-you-down ride has begun to let you down. If you’ve had your car for a while, you may find yourself at a crossroads: Should you pony up for a major repair bill, or is it time to buy a new (or new-to-you) vehicle? While we can’t give you a hard-and-fast answer, we can walk you through the steps that can help you make the best decision for your situation.

Find out the damages

Schedule an appointment with your preferred mechanic for a repair estimate. Get a second (or third!) opinion if you think it’s necessary; just be sure to check on diagnostic or estimate fees first. You can also ask your mechanic if there’s a way to make the repairs cheaper, such as rebuilding a part instead of replacing it, using aftermarket or salvaged parts, or taking advantage of any coupons or special offers. Another important question to ask is what other fixes or maintenance they see on your car’s horizon. Ask them to check the condition of your brakes, tires, battery, and even wiper blades. See if you can get a feel for how long you can continue to drive the car if said repairs are made.

Know your vehicle’s value

Sites like J.D. Power and Kelley Blue Book make finding your car’s value a snap. This is your jumping-off point for weighing the cost of repair vs. buying a different new or used vehicle.

Look at the numbers

Subtract the estimated cost of the repair from the value of the vehicle — or get fancy and figure the percentage of your repair in relation to the car’s worth. Popular automotive site Edmunds recommends that you view a single repair that costs half the value of the vehicle as a deal-breaker. Others recommend following the 30% rule, which is the same concept but with a lower number; if the single repair you’re facing exceeds 30% of the car’s value, start shopping. Another popular approach is to add all recent repair costs and begin to make your assessment. Are they starting to exceed the vehicle’s value? Or have you spent more on repairs than you would have made in car payments for a year? If the answer to either of those questions is yes, then you may want to give a new purchase heavy consideration.

Reflect on the exceptions

The numbers may already be swaying you in one direction or the other; if not, there are a few other exceptions to keep in mind — specifically any upcoming non-vehicle-related expenses. Think property taxes, income taxes, major repairs, or even big vacations, all of which could affect how much money you want to spend on your ride. That doesn’t mean you can’t make an auto purchase now; it just means you need to determine if your budget can sustain ongoing payments, along with the initial outpouring of cash. If you are leaning toward a purchase, inquire about financing tax, title, and licensing as part of your auto loan.

Do you have major revolving or student debt? You might want to take care of that first before you apply for an auto loan if you think your debt-to-income ratio (DTI) might be affected. Maybe the solution is to apply for a loan now that covers your repairs and consolidates your other debt.

Has the car itself become a stressor? Are you fearful every time you start the engine that it actually won’t start — or worse yet, that it will only take you so far and leave you stranded? Do you worry about transporting your kids (or yourself) in an unsafe vehicle? Or has some of the unreliable transportation stuff blown back on you at work and you’re on precarious ground? While emotion probably shouldn’t be the sole basis for this decision, your feelings deserve to have a voice in the process.

After conducting some research, making a thorough examination of extenuating factors, and a quick nerve check, you’re ready to make a smart decision. If you’re ready to buy, UBT may be able to help get you running. Right now, we’re offering 1%ꭝ off our auto loan rates with 90 days until first payment and no pre-payment penalties. Learn more and apply online.

ꭝOffer subject to credit approval. Requires automatic payment from a Union Bank checking account. Minimum loan amount $2,500 in new money. Offer valid on applications taken on or before 09/30/2021. Not valid on loans in process. Cannot be combined with any other offer. Member FDIC.

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