New Car vs. Old Car
So which is a better financial move, an older, paid-for car that requires more maintenance, or a more dependable new and financed model?
Not only are there explicit financial considerations, such as monthly payments, maintenance, and gas mileage, but there are also intangibles to consider, such as safety features and professional demands. Underestimating even one of these factors could lead you to making the wrong decision, and ultimately end up costing a bundle.
Repair Costs vs. Monthly Payments
Whenever monthly used car maintenance expenses exceed an estimated monthly auto payment, it could be time to stop pouring cash into your old set of wheels. You’d likely be better off shopping for a newer vehicle with less wear and tear.
So how do you determine what a car payment would be? According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400. When I enter that into the Yahoo! Monthly Loan Payment Calculator and use the national average interest rate of 5.73%, I’d be paying $927 a month for three years. Expand that to a five-year payment plan and the monthly payment drops to $587, but I’d end up paying an additional $1,887 in interest fees by paying over five years. Either way, buying a new car is expensive.
If you’re spending more to maintain your old car, you will probably want to look at buying new. After all, it’s not likely that maintenance and repair costs are likely to decrease as the car ages.
How Much More Will You Pay for Insurance and Registration?
Car insurance and registration fees are generally higher for a new car. If you have a loan, and most new car owners do, you’re required to carry comprehensive insurance. Older, less expensive vehicles won’t necessarily require as much coverage, and coverage comparable to a new vehicle is often much cheaper.
Do You Take Your Car in for Regular Maintenance?
A Maine man’s 1990 Honda Accord topped one million miles this fall, a milestone Honda celebrated in October by giving owner Joe LoCicero a new 2012 Honda Accord. It was the first milestone of its kind on record for the Japanese car manufacturer, so they set up MillionMileJoe.com to explain how LoCicero managed to keep his wheels chugging for so long. According to the website, Joe followed his owner’s manual and maintenance schedule to the letter, checked and switched the car’s fluids regularly, and never allowed his oil to fall below a quart low. He also replaced the fuel pump, both cooling fans, and the radiator twice, though he certainly got a lot of miles for the investment.
Joe LoCicero proves that regular maintenance is a way to add value to your car. It will help you avoid costly repairs and add years of life to your vehicle. But if you tend to procrastinate and skip regular maintenance, driving an old car may not be the best decision for your budget.
How Much Could You Save in Gas?
Is your old car a gas hog? Newer cars may get better mileage, which can save you a lot of money over time.
Check out the gas mileage calculator at MPGomatic.com to compare the mileage of your current car to a newer model vehicle. Just enter the current price of gas, the miles per gallon, and the miles driven to find out which car will save you more at the pump. To really get more distance for your dollar, consider purchasing one of the most fuel efficient cars.
Do You Make More Money By Driving a Nicer Car?
For some professionals, such as lawyers or salesmen, a car can be part of your brand. That means driving a nice-looking vehicle could potentially boost your credibility in the eyes of some clients.
However, personal finance expert SE Day warns consumers that there is no such thing as job security. Day counsels people to never spend more than 22% of their net pay on the cost of a new vehicle. Also, consider that when you finance a vehicle, roughly $17 to $29 per $1,000 of your loan will be added to your monthly payment for finance charges.