If your car is in need of some TLC and you’re finding yourself repeatedly bringing it into the shop, you may be wondering if it’s worth repairing or if it’s time to get rid of it (or trade it in) and get yourself a new vehicle.
While repairing your car might be cheaper upfront, it can cost more in the long run. Before deciding between repairing your car and buying a new one, consider cost, future expenses, and the current state of your vehicle.
Key Points
- Deciding between repairing your current car and replacing it with a new one comes down to your budget, lifestyle, and the extent of repairs.
- You may want to consider repairing your car if your car still meets your needs, the repair costs are low, and the car has low mileage.
- Buying a new car may be worth considering if the repair costs are expensive and extensive, your car no longer suits your lifestyle, and your car has high mileage.
Should You Repair Your Car Or Buy A New Car?
Whether you choose to repair your car or buy a new one depends on a few factors, such as the following:
- Repair Costs: As a general rule of thumb, if the cost of repairs will be more than 50% of the value of your vehicle, it may not be worth repairing. Instead, it may be time for a trade in.
- Mileage: If your car has low mileage, there may still be quite a bit of life left in it. On the other hand, if your car has a high odometer reading, it may not be worth pouring more money into it.
- Performance: If your car only acts up once in a while. It may be worth it to keep up with maintenance and repairs. But if the car is continuously breaking down, it may not be worth saving.
- Your Lifestyle: If your car has features that suit your needs, it may be worth hanging on to it and making the necessary repairs. But if you’re outgrowing your car, it might be time for a change.
| When To Fix Your Current Car | When To Buy A New Car |
| Repairs cost less than 50% of your car’s value | Repairs cost more than 50% of your car’s value (or worse, it costs more to repair your car than the car’s worth) |
| Your car is paid off | You can afford a down payment and new car loan payments |
| Your insurance premiums are low | You’re paying high premiums |
| Your car has low mileage | Your car has high mileage |
| Your car has no history of major issues | Your car is constantly breaking down |
| You can make some repairs on your own | Repairs are extensive |
| Your car suits your current lifestyle | Your car no longer suits your lifestyle |
Factors To Consider When Deciding To Repair Your Car Or Buy A New Car
Before deciding whether to repair your car or get rid of it and buy a new one, here are a few important considerations to make first.
Assess Your Vehicle’s Condition
Take a close look at your car and look at the following factors:
- Frequency of breakdowns
- Extent of necessary repairs
- Whether the car meets your lifestyle and transportation needs
- Mileage
Determine The Costs Of Repairs Compared To Replacement
Perhaps the most important consideration to make comes down to finances. In other words, you want to make a decision that is most economical. As such, you’ll want to calculate the potential cost to repair your vehicle before deciding whether it may be best to move on to a new vehicle.
Cost Of Repairs
Consider the immediate repair costs, as well as potential costs you may encounter in the near future. You’ll also want to factor in the cost of ongoing maintenance, which tends to be more frequent and expensive as the vehicle ages.
Cost Of A New Vehicle
Look into how much a new car (or a new-to-you used car) would cost, including the following:
- Down payment
- Monthly car loan payments
- Interest charges financing
- Dealership fees
- Sales tax
- Insurance costs
Compare the costs for each option to help you decide which one makes most economical sense.
Find Out Your Vehicle’s Current Market Value
Research the sale or trade-in value of your current vehicle using online resources such as Canadian Black Book or Car Gurus. If the cost of repairs is more than your car’s current value, it may be time to opt for a new car.
Learn more: How To Find Your Car’s Value In Canada
Consider How Your Current Car Meets Your Lifestyle Needs
You may have specific needs that you want your car to meet. For instance, if you have a growing family, you may want more interior space. Or, if you’re an avid traveller, you may also appreciate extra cargo space.
If your current vehicle already has the features you need, ask yourself whether they’re important enough to stick it out with your car and are worth the cost of repairs. If they’re not, or your car is no longer suiting your needs, it may be time to consider selling or trading it in.
Assess Your Finances
If you’re thinking of buying a new car and have the credit score and income needed to get approved for a car loan with a good rate, you can consider buying and financing. But if your credit score or finances make it difficult to secure a loan, you may have to stick with your current vehicle and deal with the repair costs.
How Much Car Can You Afford?
If you decide to replace your car for a new one, you should first determine whether you can afford to buy another vehicle. Even then, you’ll need to determine how much you can realistically afford in a new vehicle purchase.
If you’re buying the car outright in an all-cash deal, you’ll need to make sure you can cover the full ticket price of the car. But if you’re financing the vehicle, the cost of purchasing and financing involves more than just the sale price. You’ll need to consider the following car loan costs:
- Down payment
- Monthly loan payments
- Interest charges
Regardless of whether you pay in full upfront in cash or in finance, you should also be sure to factor in the following:
- Insurance
- Gas
- Maintenance
- Repairs
Can You Afford A New Car?
Not only will you have to make sure you can afford your car payments, you’ll also want to ensure that you can continue covering your existing bills.
There are a handful of ways to calculate how much you can afford. Here are a couple of the more popular methods:
20/4/10 Rule
The 20/4/10 rule can be broken down as follows:
- 20% Down Payment: Your down payment should be at least 20% of the car price. This can help you avoid becoming the victim of vehicle depreciation and potentially ending up ‘upside down’ on your car loan. A higher down payment also means you won’t have to borrow as much, which can help keep your monthly payments down.
- 4-Year Loan Term: Keeping your loan term to no more than 4 years can help you avoid paying too much in interest that would come with longer loan terms.
- 10% Percentage Of Your Income: You should ideally spend less than 10% of your net income on your car loan payments, which can protect your savings.
10% To 15% Rule
Another way to determine how much you can afford in car loan payments is by using the 10% to 15% rule. This strategy suggests spending no more than 10% to 15% of your gross annual income on car loan payments.
Learn more: How Much Car Can I Realistically Afford?
Can You Finance Your Car Repairs?
If you’ve decided to keep your current car and pay for repairs instead of getting a new vehicle, you may still find it difficult to cover the cost of fixing it. If that’s the case, you may consider financing the cost of car repairs to spread out the expenses.
An auto repair loan is a form of financing that provides funds to cover the cost of repairing and maintaining a vehicle. You’ll receive the necessary funds upfront, which you can use to pay for your car repairs. The loan is then repaid via installments, which include both principal and interest, over a set term.
Auto repair loans help you pay for repairs upfront at the time of service without having to wait to save up for the money needed to bring your vehicle back up to par.
Learn more: Auto Repair and Maintenance Financing
Bottom Line
The decision of whether to repair your current car or replace it with a new one depends on several factors, including your finances, lifestyle, and repair costs. Be sure to crunch the numbers and do some research on both of the available options and see which makes the most sense for you.
