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Keep Driving an Old Car or Buy New – What’s Better?

By Alison Storm

driving a used carAfter my husband and I said our “I do’s,” we walked through a shower of rice and hopped into his black Mini Cooper S. It’s where we shared our first moments alone as a married couple, so when the time came to sell the car, it was a bit difficult. But I think it was one of the best financial moves we ever made – at least, that’s how I feel when our 1998 Audi isn’t in the shop.

I’ve been on both sides of this debate for a while now. I’ve been a poor young professional hovering slightly above bounced checks and ramen noodles who could not handle even the slightest unexpected car repair bill.

I’ve also been the debt-free fanatic who doesn’t care what kind of car I drive, as long as I have no car loans. So which is a better financial move: an old, paid-for car that requires more maintenance, or a more dependable, new, financed model?

The Cost-Effectiveness of Driving an Old Car

The financial wisdom of keeping or purchasing an older model car comes down to one thing: cost. But the costs associated with this decision are numerous.

Not only are there explicit financial considerations, such as monthly payments, maintenance, and gas mileage, but there are also intangibles to consider, such as safety features and professional demands. Underestimating even one of these factors could lead you to making the wrong decision, and ultimately end up costing a bundle.

Repair Costs vs. a Monthly Payment

Whenever monthly used car maintenance expenses exceed an estimated monthly auto payment, it could be time to stop pouring cash into your old set of wheels. You’d likely be better off shopping for a newer vehicle with less wear and tear.

So how do you determine what a car payment would be? According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400. When I plug that into the Yahoo! Monthly Loan Payment Calculator and use the national average interest rate of 5.73%, I’d be paying $927 a month for three years. Expand that to a five-year payment plan and the monthly payment drops to $587 – but I’d end up paying an additional $1,887 in interest fees by paying over five years. Either way, buying a new car is expensive.

However, if you’re spending more to maintain your old car, you will probably want to look at buying new. After all, it’s not likely that maintenance and repair costs are likely to decrease as the car ages.

car repairs

How Much More Will You Pay for Insurance and Registration?

Car insurance and registration fees are generally higher for a new car. In my case, the annual tax payment on our 1998 Audi is about $85, while the bill for our 2007 Honda Element is four times that amount.

If you have a loan (and most new car owners do), you’re required to carry comprehensive insurance. Older, less expensive vehicles won’t necessarily require as much coverage, and coverage comparable to a new vehicle is often much cheaper.

How Do You Feel About DIY Repairs?

Florida resident Mike Arman is strongly in favor of used vehicles. The 65-year-old has owned around 150 cars, ranging from a Fiat 500 to a Porsche, and only two have been brand new. He says more people might see the value of buying used cars if they could get comfortable taking care of some of the repairs and DIY car maintenance themselves.

Arman explains that while chain car maintenance outlets charge approximately $150 to replace front brake pads, the job can be done for much cheaper. The needed parts are only $20, and often come with a lifetime warranty, which means you receive free pads each time you need a new set.

The job takes only an hour the first time. “You need a pair of gloves, some jack stands, and a willingness to get a little dirty and perhaps sweat a bit,” says Arman. Doing the work yourself saves you around $130. You may even just purchase the parts on your own and take them to a self-employed mechanic to do the work to cut repair costs.

It’s true that all cars will require repairs now and then, but they can mount quickly with an old car. About a year ago, our Audi was in the shop repeatedly and ended up racking up $2,000 in repair bills. We came close to trading the car in for a newer model, but decided to hold onto it. I think that was a good move. In the last year it has not needed any repairs.

car maintenance

Do You Take Your Car in for Regular Maintenance?

A Maine man’s 1990 Honda Accord topped one million miles this fall, a milestone Honda celebrated in October by giving owner Joe LoCicero a new 2012 Honda Accord. It was the first milestone of its kind on record for the Japanese car manufacturer, so they set up MillionMileJoe.com to explain how LoCicero managed to keep his wheels chugging for so long.

According to the website, Joe followed his owner’s manual and maintenance schedule to the letter, checked and switched the car’s fluids regularly, and never allowed his oil to fall below a quart low. He also replaced the fuel pump, both cooling fans, and the radiator twice, though he certainly got a lot of miles for the investment.

Joe LoCicero proves that regular maintenance is a way to add value to your car. It will help you avoid costly repairs and add years of life to your vehicle. But if you tend to procrastinate and skip regular maintenance, driving an old car may not be the best decision for your budget.

How Much Could You Save in Gas?

Is your old car a gas hog? Newer cars may get better mileage, which can save you a lot of money over time.

Check out the gas mileage calculator at MPGomatic.com to compare the mileage of your current car to a newer model vehicle. Just enter the current price of gas, the miles per gallon, and the miles driven to find out which car will save you more at the pump. To really get more distance for your dollar, consider purchasing one of the most fuel efficient cars.

Do You Make More Money By Driving a Nicer Car?

For some professionals – such as lawyers or salesmen – a car can be part of your brand. That means driving a nice-looking vehicle could potentially boost your credibility in the eyes of some clients.

However, personal finance expert SE Day warns consumers that there is no such thing as job security. Day counsels people to never spend more than 22% of their net pay on the cost of a new vehicle. Also, consider that when you finance a vehicle, roughly $17 to $29 per $1,000 of your loan will be added to your monthly payment for finance charges.

buying an expensive car may not be a wise decision

Safety Concerns

Some people use safety as a reason to buy a new vehicle, regardless of cost savings or an added expense. While it’s true that newer vehicles are equipped with additional safety features, many older vehicles have them as well.

For instance, the Federal Motor Vehicle Safety Standards have required dual-front airbags in all models since 1998. But it is important to do your research when buying an older model to ensure you’re getting a car with good safety records.

Final Word

It may be wise to do some soul-searching before you begin the car hunt. Are you really buying a new car because it’s more reliable, or are you more concerned with what others may think of you? Try to find a model that you know will be more reliable, rather than being concerned with how impressive it looks.

If you’re willing to put in the time and effort to maintain a car, especially if you’re a DIY type, maintaining or buying an older used car is probably the best financial move for you. However, if you find that buying new is the best choice, you’ll want to research the pros and cons of leasing a car vs. buying new. Either way, do your research and you’ll end up with a vehicle that fits your needs and your budget.

Do you drive an older car to save money? How has it held up so far?

(photo credit: Shutterstock)

Alison Storm
Alison was born, raised, and educated in Iowa, but now lives in Greenville, South Carolina with her husband Tim. She works full-time as a writer, and loves her job, her church, and traveling. She's spent time in Belize, Guatemala, and the UK, but her most powerful journey was to Liberia, West Africa where she helped drill wells in remote villages with Water of Life. She's passionate about saving money and helping others do the same. You can learn more at AlisonStorm.com.

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  • http://dojoblog.net/ Dojo

    I have bought a NEW car. Had to pay for it 4 years. I have 3 more payments to make (3 more months). It’s almost as new (since I take very great care of it) ~15k miles on it. Excellent shape and condition and it will surely serve me for the next 6-8 years at least.

    I chose this since 1. I don’t want to change the car in 2 years and 2. I don’t trust used vehicles. I could live with one that’s been 2-3 years old, but that would have cost me similarly (well, not 13K euro, but 10K or something like this, which is still a load of money. So, I chose the ‘security’ of a brand new car and it hasn’t been a wrong solution, since my expenses are minimal. The vehicle was brought from the factory, perfectly new and fine. If I take care of it, it will stay in a great condition and I can enjoy it for years to come.

  • http://www.debt-tips.com/blog/ Kris @ Debt-Tips

    I’ve driven many old cars. For me the breaking point is when repairs cost more than a new (used) car. I wish money was no object and I could easily buy a brand new car, but I look for good deals on high quality used cars and usually end up with something good, reliable, nice looking, and economical. For my last used car I waited for the right car at the right price and found one where the price dropped nearly $2,000 and ended up less than I was willing to pay!

    • Volvonut

      less than you were willing to pay? now that’s rich.

  • Anonymous

    I have never had a car payment in my life. When I was very young, I just bought junky used cars so I could slowly save for a new car. Since 1980, I have always paid cash for a new car under warranty and kept it until it was falling apart and/or costing me a lot of money. Currently, me and my wife feel the same about this. Except for the junky 1980 Chevrolet Citation, the other new cars since then have been high rated in Consumer Reports and message boards. We usually keep the new cars we bought for over 10 years. For example, our 1991 Honda Accord was let go in 2009 due to mechanical problems we could not get fixed. When you keep a car a long time, you do not worry about parking lot dents and minor accidents. Also, once it gets old, you can save a lot of money on car insurance premiums. The major reasons we only get new cars is because we are the only ones who will maintain it, any major problems can be fixed for free during the warranty period, and the cars tend to be more efficient especially currently.

  • http://www.carinsurancecomparison.com/ Tyler S.

    This is interesting because people have had success in both directions. Personally, I’m an advocate of the buy cheap and run it till its last breath approach. Do your research to find a reliable model, and a year without a lot of known issues. There’s no reason to spend excessively for me, I just need my car to get my from point A to point B.

    I try to keep my Honda Civic maintained, but I’m not too worried about the outside appearance. My friends have had problems in the past buying new cars, and expressed their regret at how much they wasted, what they could have saved for, etc.

    Glad to see the new car option works for some though, Dojo, nicely done!

  • canali

    seems like an ‘either new or used’ car argument put forth…what about something in between, ie, buying a good quality reputable used product, say toyota or honda that is from 5-10 yrs old?…both brands are highly reliable and at those ages the depreciation has already largely been eaten up.

    • http://www.facebook.com/brian.larson.33483 Brian Larson

      Uh? How is your argument different than the used car argument?

  • http://www.facebook.com/katiemullinax Katie Mullinax

    Great post, Alison. My husband and I have an old and new car… but the new one was a gift, thankfully. Car maintenance on much older cars can be sky high (transmission replacement? ugh!), so I’ll probably get a semi-new (but not) car when the time comes.

  • http://www.rayskillmanautomall.com/section/secondary/auto-finance-dept/ Leisa Dreps

    We all have different preferences when it comes to our choice of vehicles. Some pick the newer versions because these have features not found in other models, while others use older models since they’re easy to repair. Either way, the most practical way to preserve a car is to do regular maintenance. It is also advisable to drive carefully to avoid damaging the moving parts of a vehicle.

  • Acurarsxguy

    In todays market, new car prices are out of sight. My wife was looking at a 2007 Chevy Tahoe with 80K, and the dealership wanted $19,000 for it. As far as used cars prices, it depends on the vehicle, make, and model. I don’t know how people can afford a new car payment today. I would rather spend $1000 on a nice used vehicle that needs some mechanic work, then have a $500 a month car payment. There are alot of nice used cars out there that are cheap that need some mechanical work. I love fixing things, especially cars. If you can save yourself a buck by fixing your vehicle yourself, then your keeping money in your wallet!

    • Volvonut

      I drove a used Acura TL and was blown away at awesome it felt before I settled on an LS400 which I got rid of because I was tired of making those nasty monthly payments. BEST plan is to do a lot of research based on what you like and get the one that is the best fit for you then take those monthly payments and bank them then when a trans/eng/suspension/electrical problem crop up on you the money is ready to go for the fix with enough left over for the rental car which you can get from relayrides or one of the other rent share programs that are “hip” these days! I plan on getting a Volvo for my next car like a 98 – 2000 s70 / v70 maybe newer cash.

  • Franzijavier

    Keeping an older car (a 95 Corolla with carburetors,crank windows and no electric gizmos whatsoever) is the best decision I’ve ever made. The car never gave me any problem in my 7 years of owning it;my only expenses are regular oil changes,fluid checks and tire rotations. Never missed a beat,purrs like a kitten and zooms like a panther. I believe it will last me another ten years. it’s a bonus that it looks better than many 2012 models around.

    • Picasso Ng

      There was no carburetor on your 1995, 1985 maybe. Carbs were mostly gone between 1984 and 1987.

      • Volvonut

        Maybe he bought it with the carb conversion kit …ever think of that? C’mon man ya gotta think outside of the norm once in a while!

      • dsm6678

        I believe 1991 was the last year an American car was produced with a carburator which was a Jeep Grand Cherookee equipped with the American Motors 360ci V8 engine produced from 1970 to 1991

  • ohiodale

    I like to keep cars about 10-11 years. I am currently driving a 9 year old car and will keep it another 2 years. I could keep them longer but why would I want to drive a car that could leave me stranded on the side of the road? I have seen many older cars that people claim are perfect but they obviously have different definitions of perfect and most of them have mechancial issues like bad struts and other suspension parts, accessories that no longer works, and body imperfections. I usually get low interest loans. My current loan is for 2.7% for two years. I borrowed $9K for a brand new car after my trade in on my 2007 and some money I saved. The trade in on my 2007 was $10K less than I paid for it 5 years ago so I drove a car for 5 years for $2000 per year which to me is cheap. If I keep this new car for say 10 years I will have 8 years of no car payments and very little maintenance besides fluid changes. I am not cheap and like to enjoy my life and drive something that is comfortable and looks good. You cannot take the money with you so as long as you are saving for retirement, spend the rest.

    • Yadaking

      I like it!! You summed it up pretty nicely. I do the same. Buy brand new car, enjoy it but drive it for 9 – 10 yrs. Then, trade in for another new car. Bought $24K 2001 Accord, sold it for $3000 after 9 yrs. That’s about $200/mo. Just 60K maintenance, regular oil change. Nothing else to worry. Same for my 2005 Odyssey. $29K and sold for $7k after 9 yrs, that averages to less than $250/mo. I had dings and scratches and don’t have to worry about it unlike a lease. It’s my car, and I ain’t paying penalty for hard to avoid scratches or over mileage.

  • Dcwweb

    I have three older cars, that are very well maintained– 1996 and two 2000s. I recently calculated the cost of my 1996 Astro Van, that we purchased used 10 years ago. We paid only $7,500 and have only paid a total of $400/year since then in all car maintenance/repair costs– that is cheap transportation. We have only been stranded once when a fuel pump gave out. I have never paid anyone to change my oil, and I do other minor service work myself. The cheapest car to drive is usually the one you own. I sold a 1988 Accord with 280,000 miles on it. However, there is a point in the life of a car, that it has served its purpose, you have gotten your $s worth, and it is time to let it go, as the hassles of owning it start adding up. I kinda take pride in driving old cars– so my problem is that I do not want to let them go. Just came in tonight after doing some preventive maintenance on my old Astro van– to keep her running strong.

  • F

    Hard to say, even a new car can break , I’ve never afforded a new car or even 6 7 yr old car in my life, both me and wife driving 16 17 yr old BMW, bought the car around NZ$5000 and spent around NZ$6000 on it, most of the parts are new now, still torn between trading the car and get a fairly newer one, it is a bad situation, my only concern in the life at the moment is car maintenance cost, maxed up on credit card, not sure what else to do, do not know if it’s time to go for finance, oh by the way , my old car is still on finance, only winning lotto can help

  • MayWin

    Question, I have two cars that are the same make, model. 2009 Honda Accords one with 30,100
    miles and the other has 60,000 miles. In the next 3 yrs, which would you do, one will stay home
    80% of the time, drive the other car with 30 K everyday to work and catch-up with the other car
    that has 60 K in 3 yrs or put double the mileage on the one with 60 K. In 2015 which way would
    I be ahead ???

  • http://twitter.com/FC4JunkCars FC4 Junk Cars

    I would add something that the column missed. And that this is a strictly financial article. However there is a value to driving a ‘cool’ car that you enjoy, you spend a lot of time in your car and spend money on all other areas in your life for comfort and convenience, and a car is not a place to be skimpy on, in my opinion.

  • http://www.facebook.com/brian.larson.33483 Brian Larson

    Buy a good used car, maintain it and drive it for as long as you can, makes the most economic sense. If you can do some of the work yourself you can really drive cheaply. I prefer simple 4 cylinder cars, Japanese or domestics that have a lot of Japanese tech inside them.

  • Simon

    I’ve been considering buying a “new” used car to replace my aging vehicle. I don’t really love my car anymore, its image and wobble are driving me nuts, but it’s such a reliable car it’s untrue. However it’s approaching the age where I can see a lot of repairs. Some newer vehicles can get almost twice the MPG than my current vehicle. Savings on economy and the guesstimated repairs could see me saving half the value of the used car. Add onto that that a used car after four years will be worth approx half the cost, it pays for itself. But the problems are that a loan will tie in to a certain social position for a certain number of years. While if I did have to get rid of the newer car, could I find anything as reliable as what I have now? And I sincerely doubt it.

  • Guest

    I know DIY saves money, but for someone with no knowledge whatsover of car mechanics, it will be too time consuming to figure out what needs to be done, or worse end up with more problems. And speaking of time, if you are handy, and have the time and enjoy spending the time to replace a part, that’s great! But what about those who have a long list of chores on weekends? Also, have you considered the time you have to take from work to take your car in for a repair? Also, everyone here seems to know an honest mechanic, but I don’t. I have been ripped off too often. For someone without any technical knowledge of what’s needed to be fixed, what assurance do you have that the repair cost is fair and justified? Do you take your car to several deals and figure out? Again, how much is your time and effort doing that worth to you? I agree that as a rule, you’ll save money by keeping your car longer, but figuring out the timing to replace your car isn’t as simple as just figuring the monthly expenses vs. repair costs.

  • Harry_Wild

    Always buy a new car! No use keep a 3 year or older car that will cost you to repair and in the long run will be the same as the new car/lease payments. Just buy new and forget it! Now a days if you buy like a new BMW – even the maintenance is paid for. Cannot beat that!

  • http://www.eastsidetrans.com/clutch-repair/ honda transmission repair Roch

    Quite nice post thanks………

  • Tony Westcoast

    Whether new or old, you’ll have to replace brakes, mufflers, hoses, tires, and oil on a regular basis, so no difference in maintenance on new or old. Engines and transmissions will easily go 200,000 miles and more when serviced as per the owner’s manual so a car will last at least to that mileage mark and more. True an older car will need things like water pumps, wheel bearings, or radiators need replacing. However once replaced, those items last a long time. So even if it costs $1,000/year to maintain a car, it’s still cheaper than spending $6,000/yr in car payments. And the advice to replace the car if a repair exceeds the value of the car isn’t sound. It’s the value of the future life you need to be concerned about. It’s still wise to spend say $1,200 on a car valued at $500 if there is reasonable expectation that the repair will give you another 3-5 years use of the car. The alternative is to spend $15,000 on a “new” 2nd hand car that I would still need to service. So the $1,200 makes more financial sense. In fact, that’s what I did last year and the mechanic said the 23 year old car will easily last another 5 years. So buy quality (Japanese or German), maintain it, take care of the small issues, and spend what you save elsewhere.

  • Yadaking

    I personally prefer to buy brand new car in cash, enjoy it but drive it for 9 – 10 yrs. Save the money for the next car in the mean time ($250/mo). Then, trade in for another new car. Bought $24K 2001 Accord, sold it for $3000 after 9 yrs. That’s about $200/mo. Just 60K maintenance, regular oil change. Nothing else to worry. Same for my 2005 Odyssey. $29K and sold for $7k after 9 yrs, that averages to less than $250/mo. They rarely gave me headaches and problems. Once they start at 90K miles, it’s time to get rid of them. I had dings and scratches and don’t have to worry about it unlike a lease. It’s my car, and I ain’t paying penalty for hard to avoid scratches or over mileage.

  • Kevin Blanco

    I’ve been wrestling with this decision myself recently and as frugal with money as I like to think I am I’ve decided to keep my old car, incur the maintenance cost vs. buying a new car. For me I’m not really concerned with the mileage I put on my car as I keep it looking nice and keep up with any maintenance or repairs. I just found a car I like, a 2014 Chevy Cruze, and compared it to the car I have, a 2001 Pontiac Grand Am. While the Pontiac has a V6 to the 4cyl in the Cruze, the MPG works out surprsingly the same (I still have the window sticker listing the Grand AM as getting 21City 33Highway), the only thing it lacks that the Cruze has is an MP3 player dock. But the Grand Am does have a cassette player as part of the stereo system and for a $10.00 cassette adaptor my Grand Am now plays MP3. So I did drop $2000.00 for some transmission and engine work, but it’s definetly better than the $20,000.00 I would’ve dropped for a new Cruze and all I would’ve shown for it would’ve been an MP3 player jack in the stereo… By keeping my older car I put some money into it but saved $18,000.00!

  • Ahmad

    Hi John,

    I live in Winnipeg as well and I drive a 2000 Ford Taurus station wagon with 140K. Recently my car was acting just like your car, I wanted to change the plugs and it was about 250 dollars, so I did not do it. Someone told me to check the filter. And there it was, my air filter was very dirty. I bought a filter for 8 bucks from a part shop on Pembina Hwy, and everything started to work just fine.
    So, please check your air filter, who knows, it may fix the problem.

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