Have you ever needed a car repair that cost you hundreds of dollars? Or maybe even a couple of thousand dollars? I sure have. It can happen pretty easily too, with the prices of parts and labor being what they are.
It can be frustrating and inconvenient, and it’s even worse if you don’t have the money to pay for what you need.
Getting a new car instead can be tempting
That’s probably exactly the point at which you’ll wish you had a new car. It sounds so good, right? Instead of constantly paying for repairs and maintenance, you can just get a comfortable, nice-looking new car. It’ll have a bumper-to-bumper warranty, so you (supposedly) won’t have to worry about a thing.
Except…
According to this article on Dave Ramsey’s site:
Recent statistics show that one-third of car buyers sign up for a six-year loan at an average interest rate of 9.6%. Among these buyers, the average price of the car is just over $26,000. This means that one-third of the cars you see on the road are dragging a $475 payment behind them.
So those people have essentially traded the possibility of some several-hundred dollar repairs for the certainty of 72 several-hundred dollar payments.
That makes no sense.
When replacing a car makes sense
There absolutely are times when replacing a car makes sense. To my of thinking, that’s when:
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Your car really is breaking down all the time (as opposed to it just feeling like it’s always breaking down)
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You’re not confusing maintenance (new tires, alignments, brake jobs, clutch, timing belt, checkups) with repairs (your radiator springing a leak, for example)
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You just want a different car
But they only truly make sense if you’ve got the money to pay for that replacement car (after selling your current one).
Paying cash for a car
“But I can’t afford to just buy a car outright!” you may say. And, well, maybe you don’t have that kind of cash just sitting around, waiting to be spent on a car. I know I don’t.
But, I’d argue that if you don’t have the cash to buy a car outright, or to pay for repairs, you also can’t afford to be spending hundreds of dollars a month on a car payment.
But you can get your current car fixed now, and then start setting aside whatever you’d thought you could afford in monthly payments into a replacement car fund.
You can either keep that up until you can afford to pay cash for the car you really want, or until you’re able to at least buy a better car than what you have now. (And then rinse and repeat, til you get the car you really want.)
Patience is key
If you want to get ahead and get out of debt, you’ve got to be patient. I know it’s no fun. I’ve never heard anyone say, “Oh I’m so happy to wait for something I want right now!”
I’ve certainly never said that myself. But I have heard people say that they’re so glad they don’t have a car payment anymore. And I’ve heard many people say that it’s worth the time and effort it takes to get out of debt. In fact, I’ll say that it’s AWESOME, and I’d do it all again in a heartbeat.
So do what’s best for you financially long term.
I'm Jackie Beck, personal finance writer and creator of 
About a month ago, I decided to replace my (17 y.o.) car. The repairs were starting to exceed the value of the car and expected more! It was time to dump it.
What did you get to replace it?
I had a friend get a new car when her old one needed new tires. It took all my strength to hold my tongue when she told me. Fortunately, they have a large income and a small mortgage.
I think a “WHAT?!” would have escaped my list. Or at the very least, an “Oh really? Let me know if you decide to do that again” — because I’m sure I could buy a perfectly good car cheaply if they’re willing to get rid of it over new tires….
After nightmare repairs with my first three cars, I’ve bought nearly new. NEVER paid anywhere near 26k and my interest rate has always been lower than 9.6%. I guess I’m lucky and below average, so it’s worked out for me that the repair costs have outweighed loan payments. I can see how it could get out of hand if you bought brand, spanking new, though.
Yeah, and I think many people are nervous about buying used cars, so they pay a lot for the “reliability” of a new car instead. (Ironically, the worst car I ever had was the one I brought brand new.)
I have always fixed my cars up to the point that the repair costs more than the car is worth. At that point I get something new. It seems to have worked so far.
I think that’s a common rule of thumb. I’ve gone way beyond that though with no ill effects.
I once heard someone say that you should “make a car payment to yourself” every month …. that way you’ll have enough to buy a car in cash when the time comes. I think that’s a good way of phrasing it.
That’s a great way to do it :)
Ramsey’s estimates are extremely conservative. 9.6% is pretty high and most likely if you have decent credit, you will not pay that much. A $475.00 a month car payment is a very expensive car. I bought a brand new car recently – a modest sedan at around 6.5% . My payments are just under $300.00. I am not a haggler; someone else could have gotten a much better deal than I did. Nonetheless, my old car needed a new tranny – for around $2,000.00. That’s a lot of car payments. And that is assuming you will have no other repairs by the time that is paid. However, my insurance did go up quite a bit with the new car.
Hm, but you are unlikely to have $18,000 worth of repairs over 5 years on a car, and that’s what a $300/mo car payment for 5 years comes out to. I’m not sure I’ve even had $18,000 worth of repairs on my current car, which I’ve had for a very, very long time.