Knowing when to bite the bullet and buy a new car, rather than fixing the old car is always a tough decision. A ChristianPF reader wrote in this week asking for advice about his situation. I thought it would be a good question to get some feedback from the readers, so feel free to help him out by sharing your opinion in the comments section.
Here is what what he writes…
I have a question about the right time to buy a car. Here’s the deal…
My wife and I worked for almost 5 years to become debt free, which we did a year ago last Christmas.
After that, she went back to school (and yes, she’s still in school) so our income dropped by about 25K. Long story short, we haven’t been able to save any money toward a car and now we need one. The result is that we can’t go anywhere long distance. We’re 7 hours from Florida, but don’t trust the vehicle for more than 50 miles from home. Our van is a 1996 Chrysler with 248,000 miles on it and we’ve been driving it for 10 years.
My question is this, should we buy a new (used) vehicle or put $2000 – $2500 into the one we have (which is about how much it’s worth) and keep driving it for another year or two. The vehicles we’re looking at are $15,000 – $18,000, by the way.
I know we should have saved enough to buy cash, but it didn’t turn out like that and I’m just trying to make a good decision. Any help would be greatly appreciated.
If you have an opinion please share your thoughts!
Photo by Mcgraths
{ 22 comments… read them below or add one }
I don’t trust Chrysler products very much so I would vote on selling the van you have an getting a new car. Although I wouldn’t buy at $15 -$18,000 car if you have to go into debt to do so. I would try and sell the van and between now and the time you sell it scrape up as much money as possible and buy another cheap car that will work until you save up the cash for the car that you really want to get. If you worked 5 years to get out of debt I wouldn’t be so quick to jump back in. There are always ways to pick up your income for a short bit.
I, too, am working at becoming debt-free, so I have not implemented this yet, but here’s my thinking on it:
Any time you get a car over 10 years old and/or over 200,000 miles (some would say 150,000 or even 100,000) you’re doing well if the car can meet your needs. Since your car is both over 10 years old and over 200,000 miles, it would probably be more feasible to get a new-used car.
I heard some people use a rule of thumb of not putting more money into a car at one time than it is worth at the time. I doubt your Chrysler is worth $2,000-$2,500.
I would say purchasing a new-used car is in order, but I think you need to entertain the idea of something a little cheaper since you haven’t saved up at all. You don’t want to be paying it off 4 years from now.
I’m facing this question myself right now – further complicated by getting married soon.
Do I continue pouring repair money into my old car, hoping that it continues to last, or do I bite the bullet, stop throwing good money after bad, and start looking for the replacement?
As much as it hurts, I think I’m still going to keep fixing the car I have, as long as I can do it for less than the car’s worth. If it gets too expensive, I may even rethink the question entirely and try going without a car for a while.
When you start putting as much money into a car as it’s worth, however, you have to ask yourself some serious questions about the viability of that solution.
If I were in the questioner’s position, I think I’d rethink the question: if the car’s not worth what you’re putting into it, sell it (it still has some residual value). Then put that money, combined with the money you would have spent on repairs (and maybe a little more) to buy an in-betweener car.
It may not be the one you really want, but you can start saving up for that now that you have something more reliable. You can always sell the in-betweener as you get ready for that final step up.
Remember: have a car is often a need. Having the car we want, isn’t.
This is certainly a tough question, but a common one. I just had a car roll -over 100,000 miles and was proud of myself. I don’t think I’ve ever done that before and I’m looking forward to the trip to 200,000.
So, unfortunately you don’t have the savings, but you may need another car. I suppose you have to evaluate the need to take a long distant trip versus going into car debt. If you choose to go into car debt I would try an upgrade strategy. Perhaps you can squeeze your budget, work extra, etc. and try to find a way to save and buy a cheaper used car. Dave Ramsey always talks about driving beaters. Maybe you need to start searching for cars for only a few thousand and see what you can find. You could move up a thousand at a time until you find the right one. Then, drive it, sell it and take what you get for it plus savings to upgrade a little more. The more you save, the faster you can upgrade. Look at this as an opportunity to be different than the norm. Don’t go out and finance a brand new car. Work hard to avoid the debt. At least, that’s what I would try to do.
My opinion varies slightly from some of the others here. I’m thinking with the lower income and your wife in school, the best bet would be to either repair the van or spend as little as possible to get a car that will last a few years. Getting into $15-18,000 debt is not a good idea at all. In setting our household budget, I can always find somewhere to tighten down a little to save up for big purchases. If you have a long trip you’d like to take, maybe someone you know could loan you a vehicle or you could consider renting a car. Renting would still be much cheaper than spending thousands of dollars!
The best time is when you have cash. This may mean that you can’t buy a $20,000 car… If you can only save $5,000 then that is how much you can spend. No payments.
I have to agree that getting back into debt should be avoided if at all possible. Like most above, I think that since the van still runs you should repair. If that turns out to not be an option, try to borrow as little as possible toward a decent, well-used car.
I had a car completely die on me a few years back and we were in the same boat. We found a 9-yr-old Honda Accord with 95,000 miles on it that we could pay off fairly quickly. It is still running well now with 170K miles.
I would avoid the debt to the best of my ability. We are debt-free as well, and in years past we have always tried to repair the vehicle if we could…. spending $2000 is less than spending $15000, after all, and you still have the freedom to remain debt-free
If you just can’t stomach the repairs, I would buy a car for $5000 to $8000 or so from a private party with well-detailed records. Craigslist has been a gem for these kinds of autos. You may be surprised at what you find.
You will be lucky to get 1-2 years out of that car, I would go for something else. Don’t forget to look at vehicle safety when you are picking out a car. I appreciate the folks who are encouraging the purchase of a less expensive car, but don’t get to the extreme that you are sacrificing your family’s safety. When I look for a car I look for Safety, Reliability, Cost, Durability… in that order.
I agree with pretty much everyone else, do not go back into debt to finance a car. Here’s a little video illustrating a pretty cool concept from Dave Ramsey on how to upgrade your car slowly but without having to finance it.
Slow and steady wins the race. 
http://christianpf.com/buying-used-car-over-new-car/
Of course his numbers are higher than what most people could afford to save, but even if you were able to only save half of the amount he suggests to save each month it would be worth staying out of debt.
Rather than give advice on what to do, I will try to frame the question, so that you can make a value judgment as to what is most important to you.
If you want to have a $15-$18K car, you can either buy it now, and take on debt to do so, or try to save up for it so that you can pay cash.
If you buy it now and go into debt, how long will it take you to pay it off, and what will the interest costs be? If you can get a low interest rate and pay it off in a couple years, the total interest costs might not be too bad. Although it isn’t the ideal situation, as long as you can stomach going back into debt, it may not be worth fretting about too much.
If you buy a less expensive car, spending say, $8-10K, it sounds like you’d still need to take on some debt, though obviously less. The difference in the interest cost is not the main difference; it would only amount to $1,000 or so, depending on the interest rate and the length of time you needed to pay of the loan. The main difference is the amount of money you’d be spending on the car. You need to determine whether you value driving the more expensive car enough to allocate more of your dollars to it.
If you go with reinvesting in your current car while you save for the $15-18K car, you can achieve the goal of staying out of debt. On the other hand, the money invested in your current car is probably a poor investment. The loss on that investment could very likely exceed the interest costs you’ll pay if you bought that new car today.
Hope that helps you decide.
248,000 miles is Alot, if you decide to keep the Car you will have to redo the engine you will be needing an expert mechanic for that because if the job is not properly done you will end up spending your money for nothing.
I was in the same situation like you a while back and I decided to spend money on the repairs instead of selling, the guy who redid the engine didnt do it properly and i ended up selling that car after a year for almost the same price as before.
How about the idea of buying a motorcycle or a scooter while you save up for the car, motorcycle or scooter will be much cheaper than a car i guess. When you have saved up enough money then sell the scooter and then buy the car !
I do know the best months to buy vehicles! You can find those here along with a list of when to buy other products!
http://frugalfreegal.blogspot.com/2010/07/best-time-to-buy-guide-for-75-products.html
You worked so hard to become debt free. Don’t go back into debt for a car! If I were you, I would repair what I have. If you need to visit Floria take the bus, a train, or fly if you can swing it. The article didn’t state why you needed to go there, I just assumed a visit.
NO on car debt. Same spot 2 years ago. Just out of debt and my commuter car (Mazda Miata) had 200,000+ miles and blown valve. I chose to replace the engine and put a new top on. $3,500 on an ugly looking car but I get 32mpg.
Get an in between car. Loser thinking “if you think you can afford car payments but cant afford to save the money first”. Dont go back to the dark side stay out of debt!
Rent a car for long trips. And so what if you put more into your car for repairs than it is worth?! It’s still cheaper than a car payment for 3-6 years. I drive my 1997 Ford Escort and my husband drives his 2000 Subaru Impreza. Both have been paid off for years. Both of our families live very far away from us, so we rent a car whenever we have to make the trip. It equals about 1 month’s car payment, but that’s much better than 5 years of car payments.
Amen to Alia. Rent a car for the long trips. Unless you have a great, trustworthy mechanic who can guarantee that the big bucks on repair will translate into a year or more of trouble-free driving, I’d opt for a lesser expensive but lower mileage car.
I have to agree with the comments that discourage auto loans. If you have the $2500 to fix up the old car, use that towards a used car. It’s amazing what you can find when you look! A friend just bought a 1985 BMW with 100,000 in excellent condition for $700 off craigslist.com. Another friend bought a 1998 Ford Escort wagon with 120,000 for $800 about 2 years ago and it has been great on 7-9 hour trips as well as local driving. For $2000 – $2500, I’m sure there are decent cars out there that can go the distance.
Wow! $15,000 – $18,000 for a used car…must not be very used, or a super-nice car! I’ve never paid more than $13,000 for a car, new or used, and they generally last at least 10 years! (I currently drive an Audi wagon with less than 100,000 miles on it.)
No one’s mentioned the other aspect of the question: I read this differently, as in what’s literally the best time to buy a new car.
And the answer is, at 7 p.m. on the 31st of the month, when some poor salesman is desperate to make his quota. All the price quotes above are subject to some serious deflation if can you find a motivated salesman and threaten to walk if he doesn’t meet your terms.
Please don’t buy a new one..its nice for about 2 weeks and the you remember the payment coming up, when I pay cash and own it out right, I sleep better at night, buy a nice used car, If you are not a mechanic, find a friend or neighbor who is to go with you to make sure you are making a wise investment with no surprises. Buying new is waste of money in my opinion, theres a time and place for paying a premium, a new car is not one.
I think that a used car, with a good warranty would be worth the 15,000. Not only does it help you’re credit situation to get some sort of loan on a vehicle, you know that it’s going to be reliable.
Unfortunately with todays economy a “good” warranty to a dealer might be an “okay” warranty for the driver. If you are going towards a newer car I would definitely look into the back ground of the dealer, their warranties and check BBB to make sure there are no complaints about basic necessities.
After researching who you think you’re going to be buying from, I would research a car company next. Pontiacs aren’t made anymore, so why spend 15k on a car that might be a lemon? Also look at who merged with whom, one car might be cheaper than the next but are the parts for a repair?
Ask yourself hard questions, do my friends have experience with the name? do mechanics have a good feedback about the name? would I feel safe having it for as long as I had my previous car? And always, ALWAYS bring it to another mechanic to have it looked over.. if I could warn you of the people who just slap you on the back and give away nickel-and-dime cars you would be astonished.
One last item to add on in, if you can’t make a $350 a month, talk it over with a dealer and see if you can have a longer term on a loan or even a cheaper vehicle.
I decided to go with a used car with a 2 year warranty and close to no-miles, but I didn’t spend 15k on it. I knew with my budget I couldn’t afford a 15k car even if it was my last resort. There are decent deals out there for less than 9k, and if you talk to the right people they might be able to get you an even better deal than that.
Hey Everyone -
I’m the person who originally wrote Bob with this question. For now, we’ve decided to keep our van. The following post is a copy of my email to Bob on that subject. I wanted to say THANK YOU for all of the great advice. It was very helpful in guiding us to a decision.
Hi Bob,
I’ve been watching the responses you’re (we’re) getting. First off, it seems like you have some very responsible and intelligent readers. Additionally, it’s great advice and gives me lots to think about.
Because we needed to make a decision fairly quickly, here’s what I’ve done so far and where we currently are…
I took our van to a local mechanic who I trust and had them perform a service they call a pre-trip service. This is pretty much a stem to stern check that they do for about $30 and because they are always so thorough, it seemed like a good place to start. Turns out that they feel like my van is in good condition. They even said, “I don’t see any reason why this vehicle shouldn’t run for another 30,000 miles”. That was encouraging.
Their report came back with a few things that needed to be repaired. Two of those items, ironically the most expensive items on the list, are repairs that I actually had done less than six months ago at a mechanic across the street. After receiving my report I drove across the street and talked with that mechanic who agreed to replace both of those parts (two front axles) free of charge — since they are both under warranty.
The other items were fairly inexpensive totaling in less than $400. So, for now, we have decided to keep driving our van. I’m hoping that these guys are right and that the van will go for another 20,000 to 30,000 miles without needing major repairs. Of course, we all know there’s no way they can really know, and that’s where prayer comes in!
I feel like I should mention, after reading some of the comments on your blog, that the only reason we were looking at a vehicle in the $15,000-$18,000 range is because of our need for a vehicle with the room of a medium-sized SUV or minivan. Also, we were trying to buy something that was 2006 or newer so it wouldn’t be a problem to get financing and so that we wouldn’t be in the same boat — facing a lot of repairs — in the near future. Admittedly, your readers were right, it was just too much money for our position.
After working so hard to pay off $50,000 and to get out of debt, the prospect of going back into debt was not an attractive one. At this point, and after a lot of prayer, I feel the best thing to do is to keep the van and trust God to help us get through this situation until we can truly afford to purchase a vehicle without the debt.
So, as far as we can, that’s the plan we’ll follow.
Thanks again for all the help. Kirk