Ronald Montoya, a consumer advice associate for Edmunds.com, suggests replacing your old car with a new one when the cost of repairs exceeds the value of your current vehicle or is equal to one year's worth of monthly payments. Before replacing your old car, consider your overall budget and personal vehicle needs.
When Repairs Exceed Vehicle Value
If your vehicle needs an expensive repair job or you find yourself consistently spending money to keep it running, consider retiring it and purchasing another car instead. Otherwise, you may find yourself spending more than the vehicle's worth in repairs. Vehicles that constantly need repairs are obviously not running as well they should, which decreases gas mileage and reliability. Consider your budget and whether using your car's current repair expenses as a down payment can provide you with an affordable replacement vehicle.
When You Can Afford a New Car
Use an auto loan calculator to determine if you can afford to replace your car. If so, you can purchase one still under its factory warranty, which eliminates the need to pay for repairs. Edmunds.com offers several loan calculators to help buyers determine if a new purchase is worthwhile. Consider your monthly bills and gross annual income to determine an affordable down payment and monthly finance payment. Also consider the cost of car insurance, as you'll need a full-coverage policy if pursuing a loan. Full-coverage insurance is more expensive than a state liability policy.
When Safety Is an Issue
If you need new tires, brakes and rotors or have warning lights illuminating in your dashboard, you're risking your safety. Consider the safety features you have in your vehicle as well. Depending on the age of your car, it may not supply the more common safety features that a newer vehicle will. Go to Safercar.gov to review your current vehicle's rating; this government website reports standard safety feature information and uses a five-star rating system. Review newer vehicles that you might consider; many come with ABS brakes, traction control and numerous air bags. You may be able to purchase a safer, more reliable car and save money on your car insurance.
When Your Needs Change
Determine if your vehicle fits your current needs. For example, if you currently own an SUV but commute to work, you can save money on fuel costs and repairs. If your sports car doesn't suit your new family, purchase a larger vehicle to suit your family. Perhaps your job has changed, and you'd like to drive a nicer car. Write down a list of features you like and dislike about your car. Decide if you can find a vehicle that better suits your needs or if your old vehicle is suitable for your current life situation.