Automobiles are a constant drain on our resources but most people consider an auto a necessity, unless you live in a large metro area with a lot of public transportation options. As our cars get older, they require more maintenance and TLC which can put a drain on our pocket books. Then we start asking ourselves if we should fix the car or trade it in and buy a different one with less miles on it. It is tempting! Not having a reliable car can put us in a pickle if we are travelling long distances to work or if we have to drive home late at night, our safety might be a concern. It is emotionally draining to deal with breakdowns. And if you are self-employed, a breakdown could mean a substantial loss of income if you fail to be at a certain location for contract work or a business meeting. There are many factors to consider during the decision-making process to buy a new or newer car.
However, if you are just using math as your guide, it is almost always less expensive to fix the old car than to buy a new one. Assuming the old car is paid off, the best thing to do is to put $200 a month into a separate account for car repairs. Set the account up automatically so the money is transferred into that account before it goes into your checking account. At the end of the year, you will have $2400 set aside. You could have two $1200 repairs a year and still not spend as much as you would have with a $350 – $500 car payment. Plus, a newer car will have a higher insurance rate and is more expensive to register.
Then again, cars can be a symbol of success. If you are a business owner and your clients see your car, keeping the old car may not be in your best interest. Clients will often associate an older car with a sign that you are not very good at what you do. Why should someone hire you if your car does not say, “Professional”.
Buying a newer car can be a hard choice for the more frugal among us. But sometimes, it can be in our best interest to do so. If you are on the fence, make a list of your pros and cons and see where you are at then. Can it wait? Or do we need to take the plunge now. Only you know the answer to that question.