When is it no longer worth it to put money into your existing car? While there is no magic formula for answering this question, here are some important things to consider:
- Repairing a car will almost always be cheaper than buying a new car, especially if you have already paid off your car loan. So one of the first things you'll need to determine is whether you can even afford to get a new (or new used) vehicle.
- Find out the trade-in value of your current vehicle
- Determine how much of a down payment you could afford to make on a new car
- Visit dealerships, look in the paper, and check automotive websites to determine the price of the car you are considering buying.
- Speak to a bank or lender to determine what interest rate you qualify for.
- Calculate your monthly loan payment based on the sales price, down payment amount, length of the loan and the interest rate
- A newer car generally means a higher car insurance premium. Ask your insurance agent what the rate would be on the vehicle you are considering buying (year, make and model).
How much "life" does your car have left?
That will depend on several factors, including:
- Age and mileage of the vehicle
- The reliability of the make and model in question. Consumer Reports provides reports and ratings of vehicle reliability. Some cars, if well-maintained, can be expected to last until the odometer hits 200,000 miles; other, less reliable brands may be ready to retire after only half that mileage.
- Is the vehicle well-maintained? Have you gotten regular oil changes and tune-ups, maintained proper fluid levels, and replaced worn parts as needed? If you are not the original owner of your vehicle, did the previous owner take good care of it?
- What is your track record with this vehicle? Has it been reliable up until now, or has it had one problem after another? If you've got a "problem child" on your hands, it may be time for a new baby.
- Will the repairs cost more than the market value of the car? If your car is only worth $1000, it may not make sense to spend $2000 in repairs. To find the market value of your car, go to Kelley Blue Book's website.
- Avoid upside-down loans and the debt problems they cause! If you are still making car payments, don't sell your car if the amount you owe is more than the car is worth.