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.
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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