Are you wondering whether to fix the car or buy a new one? Used car prices are up huge post pandemic. Therefore, new cars may be of better value. That said, buying any type of car that costs more than 1/10th your annual gross income is a waste of money in my opinion.
This month is turning out to be an expensive one. Originally, I was planning on joining the no-spend November movement given I’ll be spending more than normal during the holidays. I’ve been tempted to buy a new or new used car for the past year since Moose is 11 years old and needs some work done. It was basically sell Moose now and avoid the extra expenditure, or buy a new new/used car in great condition.
After much deliberation, I decided to keep Moose and do some work. After 4 years, his brakes finally needed replacing. My auto-mechanic of 10 years recommended I change both rotors and pads in the front since Moose is heavy up top, and just change the pads in the rear.
I followed his directions for a total cost of $705 ($400 parts, $300 labor). $705 after tax is pretty darn good, especially after 4 years. I’ve also heard folks spend $1,200-$1,500 on brakes before. Expensivo!
When I went to pick Moose up, he wouldn’t start! It turns out the battery only had a couple months left to live after 5 years. I’m glad Moose didn’t start at the shop, rather than somewhere in the snowy Sierra Nevadas this winter! That would have been such a disaster. I spent another $90 for the new battery for now a total cost of $795. Tick, tick, tick, things are getting up there.
DECIDING ON WHETHER TO FIX OR BUY A NEW CAR
The reason why I spent months deliberating on whether to fix Moose or buy a new car is because Moose only has a Bluebook value of around $4,000. Therefore, a $800 fix equates to 20% the value of the car, and the value DOESN’T come close to going up by the amount spent. Maybe after the new brakes and battery Moose is now worth $4,200. So in essence, it’s almost like I’m losing money by fixing it to the tune of $600.
Five things to ask yourself before buying a new car:
1) Can you afford a new car? You can only afford a new car if your income is at least 10X the value of the car you wish to purchase. This is known as the Financial Samurai 1/10th rule. If you make less than 10X the value of the car, then you are hurting your finances. Do you think Mark Zuckerberg drives around in a $800 million dollar car? Heck, I was at a party with Mark Pincus, the founder of Zynga and the valet only went to retrieve a $75,000 BMW X5, and Mark is worth billions!
2) What percentage will the costs be compared to the value of your car? Maintaining a car gets relatively more expensive as time goes on because the value of your car is always decreasing while costs generally increase due to labor and component inflation. If a fix costs more than 30% the value of your car, and you can afford a new car, consider buying a new. The benefit of buying a new car is that I won’t have to buy new brakes, tires, battery, etc. Take the cost of maintenance of your old car and subtract it from the purchase price of your new car and re-calculate whether you can afford the new car.
3) Do you have any debt or other big expenses on the horizon? Think property taxes, income taxes, trips, credit card bills, student loans, and other debt. Best to minimize your expenditure on a depreciating asset if you have other large expenses on the horizon. For some reason, guys right after college are especially weak at controlling themselves when buying a new car.
4) How long do you believe your old car will last, and how long do you plan on driving it? My new brakes and battery should last at least 3 years. My existing tires should also last another 3 years since I only drive about 7,000 miles a year. Moose has 109,000 miles on it now, and he should have no problem going to 150,000. Moose’s survival is consistent with the time I’d like to stay in San Francisco. I have hope he will last for 6 years longer, which happens to be when I look to change sceneries.
5) Know your car’s maintenance cycle. The big maintenance intervals are generally after 15,000 miles, 30,000 miles, 75,000 miles, 100,000 miles, 125,000 miles, 150,000 miles, and so forth. You should consider selling about 5-10,000 miles BEFORE the main intervals and let the new buyer pay for maintenance. I recently did the 100,000 mile service, and want to milk it for as long as possible. If you don’t sell your car before it hits 100,000 miles, then you might as well keep it for as long as possible.
Related: The Ideal Length To Own A Car Is Not Forever
Fix The Car And Take A Gamble
Spending $795 on Moose is taking a gamble that nothing else major breaks down on a 11 year old car. It would be quite unfortunate if an alternator blew up, costing me another $1,000. Then Moose becomes a serious money pit as now I’m spending 50% of the value of the car on maintenance.
My desire for driving a fancy luxury car has essentially fallen to 0 given the movement against luxury. When it’s time to make the decision again on buying a new car, I will consider safety issues as the main criteria.
In 2021, I am driving a 2015 Range Rover Sport HSE. I plan to own the car until at least 2025. It’s a great family car for my wife and two children.
Related: Plug Or Patch A Tire?
Recommendation For Your Car
Lower Your Auto Insurance Costs: Check out AllState online. They have some of the best plans with the lowest rates around due to their lower overhead costs. It’s worth spending a moment filling out a quote to see if you can save some money. Car insurance is one of the largest ongoing expenses for car owners. Esurance has good driver discounts, and multi-product discounts as well.
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Wow, I never thought about checking if your income is 10x as much as the new car costs before buying it. Yeah, I don’t have that kind of money. I’ll just look into getting my old car repaired instead.
My husband is an avid lover of foreign cars and recently bought a used Ferrari to celebrate a bonus at work. He loves your tip about knowing your car’s maintenance cycle and knowing when each interval is and what it means for your car. He will be sure to keep these tips in mind as he finds a professional who can help him in the near future.
It is a great idea that you suggested considering whether you can afford to buy a new car. My father has a Honda that needs a new engine. I think it would be smart of him to find an engine rebuild service to save himself some money.
I have a 2004 Mercedes Benz C320 with 214.735 miles. I need to have the shocks and struts replaced. I know it will be a hefty amount but I just can’t imagine making a car payment. I paid off this vehicle over 9 years ago. I am working on paying off my house so I can be debt free so a car payment is not part of the plan. I just spent $650 on new tires and aftre much thought I feel it is worth maintaining my vehicle in top shape by investing the money to get .
I have a 2007 Mercedes Benz E550 with 156,700 miles on it. I just replaced one strut for $2400. Now I need engine mounts and cam magnets which is going to be another $2,700. I really love this car, but spending $6,000 this year on maintenance (just had service B for $645 and $228 for new headlight) makes me stop and think it’s time to let this car go. It has been paid off for years and really is a beautiful car that runs well.
Cool- this thread has been going for 7 years. I bought one new vehicle (Toyota tundra) when I was 26. I drove it for 250,000 miles over the course of 16 years.
$30,000. Msrp including the finance cost over 48 months.
$800 for timing belt 1 and 2
$3,600 for 6 sets of tires. Maybe more.
$37,000 for about 14,500 gallons of 85 octane. Abysmal 17 mpg life avg
$750 for three windshield replacements
$350 for set of shocks
$150 for pads and shoes
$100 radio replacement
$1700 for Mobil 1 oil changes self performed
$10,000 for insurance
$500 topper
$100 tinted windows
$80 bed liner
$800 worth of quarters at the carwash
$500 for whatever junk I bought at random gas stations
$3000 vehicle registrations and taxes
Total lifetime cost of about $90k less $7500 resale rolled into current used vehicle purchase. Essentially $500 per month for 192 months factoring ownership and maintenance costs, or $0.36 per mile driven.
Now I could have ridden the bus at 192 months x 20 days x $7 per day = $26,880. That would have saved me $62k, or enough to buy an electric car from Mr. Musk and invest an additional $25k or so into my retirement funds or mortgage or family vacations or nicer haircuts. But I didn’t and now I’m in my 40’s but will never buy a brand new vehicle again. One and done. Regardless, vehicles are expensive and I guess they keep you working to pay for them to drive to work to…what?
My preference would be to commute via bicycle but the route is interstate only and a dangerous section at that. Tried once and never again.
I would not include fuel, car washes and stuff bought at gas stations. I am in the 8th year of my 2011 Nissan Sentra and spent 10k+ this year on repairs which included a new set of tires.
I need to find a good place to take it.
Hey FS!
If someone was making over 200k and living in the economically feasible midwest (outside of Detroit) with no family and manages their finances well, what are your thoughts on the 10% rule becoming the 5% rule? :)
I am on track to early retire at 40 (and still spending VERY nicely but saving a ton too; I don’t want to live my life without adventure in my 20’s and 30’s purely for the financial goal of hitting early retirement… then I would be missing out on so much!).
I am in my late 20’s and just read your new post here (I know this post is a bit older from 2011, but still good info!) where you mention living a little and that you’re getting a new Mercedes:
https://www.financialsamurai.com/just-buy-it-youre-worth-it-everyone-deserves-to-drive-a-nice-car/
I can definitely abide by the 10% rule on a “yearly” basis by spreading out the car payment over a 8-10 year lifecycle of the vehicle, but abiding by the 10% rule all at once is def harder ($20-25k for a new car for salary over 200k).
My current car is a 9 year old, 2010 Ford Taurus (155k miles and purrs like a little baby koala, just had brakes done too). I do drive a decent amount for work with customer visits (about 20-25k miles a year), but the good news is that my ALL of my gas is compensated and they actually throw in an extra $3600 bucks a year purely for my car expenses (repairs, etc.) that I can keep the cash if I don’t have a vehicle expense that year.
What are your thoughts on this? I do want to splurge a little, but I have also looked at lease options too where I continue driving my current car (fingers crossed) until 200k or more and take the lease for a joyride on weekends, etc. Leases have problems of their own however, and they are technically a waste of money.
The best option I have come across is the certified pre-owned option where I can still hit the 25k mark but drive a nice luxury vehicle like an Audi that is only a few years old and still low in miles…
I don’t plan on having a family until after I early retire, so I don’t have this big expense to account for in my calculations. This is certainly great for now and my current saving/spending strategy :)
Thanks!
If you have a high mileage vehicle – focus on one calculation – the cost of repairs in a given year vs. cost of a new vehicle purchase (purchase finance/cash).
In a given year, $2-3,000 ($Canadian) in repairs, is still going to be less expensive for me, than getting involved in a new vehicle purchase.
For example, I had to replace the catalytic converter and power steering lines in 2018. (2007 Honda Accord). I also lost the air conditioning recently, yet I’ll be bumping that expense to 2nd quarter of 2019, so I’m good for awhile. (knock on wood).
Yes it’s inconvenient to have these items fail, but with my climate extremes I’m not surprised.
I would recommend getting a new vehicle if your current one is no longer reliable.
Read: it’s in the shop every other week for one thing or another.
Or, if money is no object and you can afford to buy new often, or lease in perpetuity, all the power to you.
Totally agree if you maintain a vehicle they should last 200,000 miles I drive bmws , just my preference I have a 1998 528i with 208,000 km and a 2010 BMW X3 with 135,000 km both run fantastic . Most owners are afraid or won’t do there own maintenance…. the basics are not rocket silence . But I also think people find it easier to drive new and make one monthly payment. I tent to keep my vehicles for a long time …if it gets a dent in it have it repaired , if it has an oil leak repair it,
I think most people don’t know how there car work or even care , me I can tell you if my car is or isn’t running right.
Last nite and the most important keep your fluids changed!
Kerry
Should you judge the value of he car based on the trade in value or private sale? I strongly prefer trading in my cars to avoid the hassle of a private sale.
Trade-in value if that’s the way you prefer to sell your car. I used to ALWAYS do private sale to get max money. But now that I’m in my 40s, trade-in value is probably the way to go for convenience sake.