It’s a weekday afternoon, and you’re dropping off your car at the mechanic — again. Lately, it seems to spend a lot more time in the shop than it used to. Looking back at all the money you’ve spent on car repairs this year, you wonder if it makes sense to buy a new car.
After all, you don’t want to wait until it’s decrepit enough to break down and leave you stranded. And it would be nice to upgrade to a car with some features yours doesn’t have.
But on the other hand, you know new cars — and even late-model used cars — are expensive. They cost more to insure too. How do you know if it’s worth the cost?
Keep Driving an Old Car or Buy New – Key Considerations
Plan to spend no more than 15% of your monthly take-home pay on your car. That includes the vehicle itself and all expenses: gas, maintenance, and insurance. The right car for you should stay under this budget while meeting all your needs, the most important of which is getting you where you need to go.
Any working car, new or old, can do that. But in almost every other respect — including cost, convenience, safety, features, and looks — they’re completely different creatures.
To decide between the two, you need to compare all these factors and consider how much they matter.
In terms of the purchase price, cars cost money in two ways. First, there’s the upfront down payment, which comes out of your savings. And second, there are the monthly payments on your loan, which come out of your budget.
These two costs are related. The more you pay upfront, the lower your monthly payments will be. Car loan calculators can help you play with the numbers and figure out how to strike the best balance between the two.
New Car Payments
Whether you buy or lease, new cars come with a monthly payment of several hundred dollars.
If you buy a car, what you pay depends on factors like the car you choose, the loan term, and the interest rate. You can figure out your expected monthly payment with an auto loan calculator like the one at Carvana.
It asks for basic information like the cost, length of your loan, anticipated down payment, and your trade-in value. It also uses your credit score to estimate the interest rate you’re likely to pay.
If you’re planning to lease a car, the monthly payment depends on different factors. These include the car model, the lease term, and the number of miles you drive the vehicle each year. You can use a car lease calculator like Edmunds’ to estimate the monthly lease payment for a specific vehicle that interests you.
Older Car Payments
A fully paid-off older car has no monthly payments. Keeping it means you can zero out that expense in your monthly budget.
But you can funnel the money you would have spent on car payments into a savings account earmarked for your next vehicle purchase. Even if you only do it for a couple of years, the saved money could allow you to make a bigger down payment and borrow less next time.
Better still, if you can keep the old car running long enough, you can buy your next car for cash and avoid a loan entirely. It’s like paying off your car loan in advance — except even faster because you earn interest instead of paying it.
Every vehicle needs regular maintenance, such as oil changes and tire rotation. Plus, cars need repairs after an accident or to replace worn-out parts. According to an analysis by AAA, maintenance and repairs can account for anywhere from 10% to 16% of the total cost of owning a vehicle.
But maintaining a car has a cost in time and hassle too. You have to spend time taking the car to and from the repair shop, and you have to get by without it while it’s there, which could mean missed work and renting a car.
New Car Maintenance Costs
New cars only need minimal regular maintenance. In its first couple of years, a car typically needs little work beyond scheduled oil changes and tire rotation.
Additionally, nearly all new cars come with a warranty to cover the cost of repairing anything that breaks unexpectedly within the first three years. As a result, the costs of maintaining a new car are minimal.
Once the warranty runs out, they start to rise, but not by much. According to a 2021 analysis by Consumer Reports, most cars cost only about $100 more per year to maintain at five years than they did at three years. It’s only once they pass the five-year mark that repair costs begin to rise significantly.
Older Car Maintenance Costs
In general, older vehicles need more maintenance. According to Consumer Reports, it costs an average of $205 per year to maintain a 5-year-old car and $430 per year for a 10-year-old car. Additionally, older cars are likely to spend more time in the shop and off the road.
But these figures are only averages. For one thing, certain car makes and models — especially European luxury brands like BMW and Mercedes — cost more to maintain than others.
And the way you treat your car makes a difference. The more careful you are about doing regular maintenance on time, the less likely it is to break down as it grows older.
To figure out the maintenance cost for your current car, add up all your repair bills for the past year or two. Then average those costs over 12 or 24 months to see what you’re paying per month.
Note that you only have to get certain big, costly repair jobs done once in several years. So if you’ve had one of those done recently, that may skew your average a bit high.
If your car maintenance costs seem unreasonably high, replacing the car isn’t the only way to reduce them. If you have the skills, you can save money by doing your own car repairs. Even with no skills, there are some basic car maintenance tasks nearly anyone can handle.
Either way, staying on top of regular maintenance and fixing problems early also keeps costs down.
Insurance & Fees
There are certain fees you must pay for any car you own. These include insurance, registration, and inspections as required by your state.
Inspection fees are likely to be the same no matter how old your car is. However, the age of your car definitely affects the amount you pay for insurance. And in some states, it may also change the cost of your car registration.
New Car Insurance
New cars typically cost more to insure than older ones. First, if you’re still making payments, the loan servicer requires you to have full coverage. Additionally, they tend to be worth more, so it costs more to replace them if they’re totaled in an accident. Thus, insurers charge higher rates to cover them.
But there are a few exceptions. For instance, if your current car is a luxury car and the one you buy to replace it is an economy car, the new one could have a lower book value than the old one. That would make it less costly to insure.
Also, new cars come with safety features that make crashes less likely and costly. If your current car is so old that it lacks critical safety features like air bags and electronic stability control, a newer car that has these features could be cheaper to insure.
To get a more accurate estimate of the insurance cost for a new car, use a free insurance quote tool such as Insurify. Enter some info about yourself and the vehicle you’re considering to get a quote, then compare that price to what you’re paying now.
Older Car Insurance
The older your car is, the less it’s likely to be worth and the less it costs to insure. At some point, the value of a vehicle falls so low the cost of repairing it is more than the car is worth. At that point, you can drop its collision coverage and comprehensive coverage, reducing your insurance premiums still more.
Calculations from Insurance Zebra show that the cost of insurance premiums drops by an average of 3.4% for every year a car ages. On average, an 8-year-old vehicle costs 25% less to insure than a new one.
In some states, registration fees are also lower for older cars. Other states adjust the fee based on the vehicle’s value, which is typically lower for an older car. You can check the National Conference of State Legislatures website to see the rules in your state.
In many cases, the lower insurance premiums and registration fees that come with an older car are more than enough to make up for its higher maintenance costs.
Another significant cost of car ownership is fuel, which depends on your vehicle’s fuel efficiency and how much you drive. According to AAA, it can be anywhere from 10% to 25% of your total cost.
New Car Fuel Costs
On average, new cars are more fuel-efficient than old ones. A 2020 report from the U.S. Environmental Protection Agency shows that the average gas mileage for new vehicles has risen from around 19 mpg in 2004 to nearly 25 mpg in 2019. Thus, upgrading to a new car could help you save money on gas.
But newer vehicles aren’t always more efficient. The vehicle type makes an even more significant difference than its age. The EPA report notes that sedans have an average efficiency of nearly 31 mpg, while pickup trucks average just 19 mpg. Even a brand-new pickup is likely to be less efficient than any sedan built after about 1980.
If the new car you choose is in the same size class as your current one, it’s likely to be more efficient. Downsizing to a smaller vehicle or switching to a hybrid car or electric can save you even more.
To estimate the annual fuel cost for a new car you’re considering, use the U.S. Department of Energy’s (DOE) fuel cost calculator. The tool is more accurate if you enter local gas prices instead of using the national average. You can check the price at a local gas station or find an average price for your state on the AAA gas prices page.
The DOE calculator displays your expected annual usage for gas or diesel as well as electricity if you’re considering a hybrid or electric car. It can also estimate the total cost of ownership for the vehicle over 15 years.
Older Car Fuel Costs
The best way to check fuel costs for your current car is to look at the actual amount you spend on gas in a year. Since many people drove less than usual in 2020 and 2021 due to the pandemic, it probably makes the most sense to check your gas expenses from 2019.
If you track your spending for your household budget, just go back and look at the total amount you spent on fuel in that year. If you don’t have those records, you can use the DOE fuel calculator to check the annual fuel cost for your current vehicle.
The tool can also compare the total cost of ownership for your current car and a new car side by side. But it compares the cost of both vehicles over the first 15 years of their life. And if your current car is already 10 years old, you’re not starting from the beginning.
Fortunately, the calculator breaks down the cost by year to give you a more accurate comparison. So use it to look at the cost estimate for the next five years.
For example, if you have a 10-year-old car, you’d take the total cumulative cost at 15 years and subtract the cost at 10 years. Then compare that to the cost for the first five years of the new car. That tells you which car should be more costly to own over the next five years.
Cars that use more gas also have a higher carbon footprint. However, for people concerned about the environment, that’s not the only factor to consider. There are also resources and energy that go into making a new car and the waste produced by disposing of an old one.
Environmental Considerations of a New Car
There’s a tradeoff between the higher tailpipe emissions of an old car and the environmental costs of manufacturing a new car. Ecologist Bill Schlesinger of Duke University calculates that the break-even point depends on how long the new vehicle stays on the road.
If you only keep it for five years, it must be at least 20% more fuel-efficient to offset the environmental cost of its construction. If you keep it for 10 years, it only needs to be 10% more efficient.
Environmental Considerations of Keeping an Older Car
The primary environmental cost of keeping an older car on the road is its higher greenhouse gas emissions. In general, the lower your vehicle’s fuel efficiency, the higher its emissions. The DOE fuel efficiency calculator can show you the estimated annual emissions for your current car.
Another potential benefit of upgrading to a new car is the improved safety features it offers. That’s especially true if you drive in hazardous conditions, where safety features can make a big difference. For example, snowy, icy, steep, twisting, and poorly paved roads all increase your chances of an accident.
In some cases, better safety features can save you money directly. For instance, they can prevent a crash that could result in major car repairs, hefty medical bills, or a costly lawsuit.
But even when they aren’t keeping money in your pocket, safety features still provide value. They protect you and your family from injury, and that’s worth paying for. The main question is whether the safety benefits justify the cost, which depends on the safety features of your old car and the conditions you drive in.
New Car Safety
Even if your current car includes basic safety features like side air bags, a new car could have more advanced ones. For instance, all vehicles built since 2012 must have electronic stability control, which helps prevent skidding. And the LATCH child safety seat system for securing a car seat has been standard since 2002.
Additionally, new cars may have:
- Forward collision warning, which alerts you to an impending collision
- Automatic emergency braking, which applies the brakes to stop or slow a collision
- Adaptive headlights, which turn with your car to improve visibility on curves
- Blind spot detection, which alerts you if there’s a vehicle in your blind spot
- Lane departure detection, which alerts you if you start to slide out of your lane in traffic
- Lane keeping assistance, which adjusts the car to keep you in your lane
- Adaptive cruise control, which maintains your distance from the vehicle ahead of you
- Backup cameras, which help you see what’s behind you when going in reverse
- Head-up displays, which project information onto the windshield so you don’t have to take your eyes off the road to look at the instrument panel
- Rear seat reminder systems, which remind you not to leave kids or pets in the back seat when you exit the car
Older Car Safety
The older your car is, the fewer safety features it’s likely to have. Air bags didn’t exist before the 1980s, and side curtain air bags didn’t become common until 1998. Further advances since that time have included rear backup cameras in 2001, blind-spot alerts in 2007, tire-pressure monitoring in 2008, and auto emergency braking in 2013.
Driving an older car that lacks modern safety features can increase your risk of being hurt or killed in an accident. According to the National Highway Traffic Safety Administration, the fatality rate for passenger cars in 1997 was 17.81 per 100,000 registered vehicles. By 2017, that number had dropped to 10.05 per 100,000 registered vehicles.
Enhanced Experience Features
Safety features aren’t the only advances to occur in cars over the past several years. Other new features can improve the experience of drivers and passengers, enhancing comfort, convenience, or entertainment.
New Car Features
When you buy a new car, you gain access to a wide array of modern features.
Many new cars can interface with your smartphone, giving you hands-free access to all your music or navigation apps. Some can even use the phone to unlock or start the car remotely. You can also get wireless charging for your devices and advanced security systems.
Newer cars can also be more comfortable thanks to features like ergonomic or heated seats. There are often more ways to adjust the position of the seat and steering wheel. And they’re more likely to have features like keyless entry or theft protection systems.
However, not all features in new cars are actually an improvement. For example, the touch screens many new vehicles now include in place of physical controls are harder to use without taking your eyes off the road.
Older Car Features
Old cars are often lacking in perks. A vehicle built before the late 1990s may not even have a CD player. Newer features like music streaming and GPS systems didn’t come out until the 2000s. And features like heated seats and theft protection are rare on older cars.
However, it’s often possible to add these extras to your existing car for a price. For example, you can add:
- A car alarm for as little as $20
- Supportive or ergonomic seat cushions for around $30 per seat
- A wireless car charger for between $20 and $50
- Heated seat covers or cushions for between $15 and $100 per seat
- A car stereo with smartphone interface for around $100
- A GPS navigation system for under $100
- A remote start system for as little as $240
All these upgrades are significantly cheaper than replacing your entire car if they’re the reason you’re considering an upgrade.
Even if there are other reasons you want a new car, figure the cost of these aftermarket additions into your calculations. Then, compare the cost to your shortlist of new vehicles with the same features.
Appearance & Specifications
A new car just looks better than an old rust bucket. For some people, that isn’t much of a concern. They just want a vehicle to get them around.
But for others, their car’s appearance is part of their image — or the image of their business or brand. That makes it a financial concern as well as an aesthetic one.
A new car can deliver practical benefits as well. Upgrading your vehicle could allow you to move more people or transport heavier loads. All those considerations can affect your bottom line and quality of life.
New Car Appearance & Specifications
In some careers, such as law and sales, it’s essential to project an image of success. Driving a clunker may make people assume you can’t afford a newer one because you’re not very good at your job. So driving a newer, nicer-looking vehicle can boost your credibility.
In this situation, a new car can help you make more money — perhaps enough to offset its higher price tag. But that only matters if your current car really is a heap.
And looks aren’t the only way a newer vehicle can affect your career. For instance, if your job involves hauling things in a truck, a newer truck with a bigger bed or a heavier carrying capacity could allow you to transport more in a single trip. That makes it possible to take on bigger jobs and boost your earning potential.
In some cases, a new vehicle can save you money for personal rather than business use. For instance, if you have a big family, a bigger car could allow all of you to travel in one car on family outings rather than taking two vehicles. That saves you money on gas.
Or if you live out in the country and regularly travel to the nearest town to shop, a car with more trunk space means you can buy more on each trip, reducing the frequency of your trips.
Older Car Appearance & Specifications
An older car that’s been carefully maintained inside and out can look just as nice as a new one. And a well-kept vintage car that’s worth a lot of money could actually be a plus for your image.
Also, the looks of a vehicle don’t matter in every profession. If you’re a teacher or electrician, no one is hiring you for your image — or your car’s. Thus, you don’t need to worry that keeping your old car will hold you back in your career.
And if you use your own vehicle for certain jobs, such as construction, it’s going to get beat up anyway. Unless you need more towing or weight capacity or a bigger bed for work, a new car you want to keep looking nice may be more hassle than it’s worth.
There’s some benefit to owning an older car with a slightly lived-in look. It’s less stressful. You don’t need to worry about every little ding or scratch on the paintwork when it hardly shows up amid all the other wear and tear.
Likewise, upgrading to a bigger car doesn’t always make sense. If your kids will be out on their own soon, your current car won’t feel crowded for long. And adding more trunk capacity isn’t a benefit if you seldom carry more than a few bags of groceries.
The Verdict: Should You Keep Your Old Car or Buy a New One?
Upgrading to a new car makes sense if it improves your life enough to justify the cost. That depends on a wide range of factors, including repair costs, fuel efficiency, safety, and features. And the weight of each of these factors varies from person to person.
You Should Buy a New Car If…
In dollar terms, buying a new car is almost always more expensive than keeping your old one. But money isn’t the only factor to consider. For some people, the improved efficiency, safety, and looks of a new car can outweigh the cost.
It makes sense to buy a new car if:
- You Can Afford It. Your finances should be your first consideration. A new car is only a good choice if you have the money for a down payment and your monthly costs — including payments, insurance, and fuel — won’t exceed 15% of your monthly budget.
- You Hate the Old One. If your old car is truly making you miserable, it’s time to get rid of it. Assuming you can afford to replace it, there’s no point in owning a car you dread the thought of driving because it’s so unreliable, ugly, or inconvenient.
- You’re Fed Up With Constant Repairs. A car has to be in pretty bad shape before its repair costs come anywhere close to the monthly payments on a new car. But the time you spend taking it to the shop and the inconvenience of going without it frequently is a cost too.
- You’re Driving a Gas Guzzler. The money you save at the gas pump by buying a newer, more fuel-efficient model won’t come close to outweighing the price of the upgrade. But it will contribute less to air pollution and global warming.
- You Need a Safer Vehicle. Advanced safety features can help you avoid a crash and survive it if you can’t.
- You Want a More Comfortable Car. The improved comfort, convenience, and entertainment features can make a vehicle more enjoyable to drive if you’re willing to pay for them.
- Your Work Requires a Bigger or Nicer Car. In some situations, a bigger or nicer-looking vehicle can help you get ahead in your career. In extreme cases, the extra money you make could pay for the car, but don’t count on it.
- You Know How to Get a Good Deal. When buying a new car, knowledge is power. Before buying, gather as much information as you can about car models, prices, and financing. That will help you when it comes time to negotiate the price.
You Should Keep Your Old Car If…
It’s easy to be tempted by a new car’s glossy exterior and creature comforts. But that doesn’t mean you need a new car, and you certainly don’t need a new car payment.
Keeping your old car makes sense if:
- You’re on a Tight Budget. You’ll almost always save money by hanging on to your old car for as long as possible. Even if a new car costs less to repair and fill up, those savings are dwarfed by the upfront cost, monthly payments, and higher insurance.
- It’s in Great Shape. An old car that’s been carefully maintained can continue running well for decades — even up to 1 million miles. Follow the maintenance schedule to the letter and check your fluids weekly, and it should serve you well for years to come.
- You Can Handle Your Own Repairs. The biggest cost of owning an old car is the repair bills. But doing your own can cut costs significantly. For instance, AutoZone estimates that replacing all four brake pads costs $230 to $540. But you can DIY for only $35 to $150 for parts.
- It Has Important Safety Features. While new car features improve safety, most of them aren’t absolute must-haves. Any car built after 2011 already has four of the five most important safety features: air bags, anti-lock brakes, electronic stability control, and tire pressure monitoring.
- It Works for Your Job and Life. You don’t need a bigger car if your current vehicle can carry everything you regularly need, whether that’s people, groceries, or lumber. And you don’t need a better-looking one if your customers or clients don’t care how your car looks.
- You Can Add the Features You Want. If you’re craving extras like heated seats or a smartphone interface, you don’t have to buy a new car to get them. Adding these features to your existing vehicle is fairly easy and much cheaper.
- You Still Love It. Even if your current car is a hassle to deal with, it’s worth holding onto if you truly love it. The sentimental value of a car you have great memories of is something you just can’t put a dollar value on.
If you’ve weighed all the factors and still can’t decide whether replacing your car is worth the cost, remember that a brand-new car isn’t the only alternative. You can compromise by buying a used car that’s a newer model than your current one.
The value of a car takes a big hit from depreciation within its first year or two. Thus, by choosing a used car that’s just a few years old, you can get a newer car for much less than the cost of a new one.
A late-model used car can be the best of both worlds, allowing you to trade in your old car for one with vastly upgraded features and better reliability at a much lower price.