Fix vs Buy New? The eternal question. Almost all objects need repair, from your home, to your car, to your body. Some are emergencies, some are planned and some are the direct result of ignoring an existing problem. Buy New is almost always the most expensive option, but faced with large repair bills, many people have to make this decision daily. This goal of this article is to help you make this decision in a manner that is best for your needs, while recognizing that the decision is both financial and personal.
Cars and Trucks are very different that other objects, such as your Home Air Conditioner, or your Home Computer in that they are mobile objects interacting with pot-hole laden streets, wind, rain and scorching sun, bouncing off other cars, walls and curbs. In other words, they operate in in-hospitable environments and as such, they are more likely to break down than is an object in a protected environment. Cars and Trucks require periodic maintenance to keep them operating smoothly and with our busy schedules, these are often overlooked or extended beyond reasonable, which puts more stresses into the mix.
All cars and trucks need repairs. Cars and trucks have become very complex machines which requires the help of professional automotive technicians to diagnose and repair. To avoid being surprised, we recommend that you setup a budget to perform your repairs. People that have a proper budget to fix a broken car are in a better financial position to make the repair vs buy decision.
Most modern cars can easily make it to 300K miles, if they are maintained. Many modern cars can implode at 60K or fewer miles. The difference is almost always the owner and their maintenance / lack of maintenance. Some manufacturers will tell you up front that you MUST maintain your car and some will lead you to believe that it is maintenance-free. The “maintenance-free” cars are replaced at a higher rate and are GREAT for new car sales.
Car “repair” bills fall into two major categories (preventative / scheduled maintenance and repairs), but most of us lump these into a single category. This complicates the Fix vs Buy decision. Whether the car is old or new, the parts are wearing out at the same rate. Struts and Shocks wear out in 50K miles. Spark plugs wear out in 60-100K miles. Belts are done in 7 years. Tires wear out in 30K-60K miles. We need to separate normal wear-and-tear / preventative maintenance from actual car repair to know the true burdened-cost of this car. Very simply put, you DON’T buy a new car to replace normal wear items. Those are replaced under your maintenance budget.
The financial portion of the Fix vs Buy decision is quite an eye-opener. Very little of your cost of ownership is used for maintenance and repairs – only 6%!!! To view the cost of ownership, one must normalize the costs and what better way to do so than to look at the Cost / Mile – just like the IRS does when computing a mileage deduction. However, we must also factor in unique costs. A $90,000 car will have more depreciation than would a $30,000 car. A gas guzzler will use more gas than a hybrid.
Graphs go here….
To the casual observer, it’s obvious that the smallest category is Repairs and Maintenance and that the largest category is Depreciation. It would take quite a bit of unplanned repairs before buying a new car makes financial sense. However, if you WANT a new car, then only you can put a value on the WANT. The other option is buying a different used car. Many used cars are sold with little or no maintenance or because a major maintenance item is needed, so buying a used car can be a gamble. Get a pre-purchase inspection to safeguard yourself.
Another take-away, is that the cost of maintenance is so low on this graph, that it makes sense to get it done. The goal of preventative maintenance is to save you from unnecessary car repairs. We recommend that you work with your local mechanic to determine the best maintenance path for your needs. It will vary if you are keeping the car for only 80,000 miles vs 300,000 miles.
Everyone should expect car repair bills and should set aside a monthly amount for these repairs. Luxury cars are more expensive to fix than entry-level cars, so budget appropriately. More electronic sensors will cost more than fewer electronic sensors. A good rule of thumb is to budget $50-100/month per car. Less for some cars and more for others. If your car does not need repairs, then this money can be used towards the eventual purchase of a new car. At the end of 4 years, $100/month gives you $4,800. This is less than the depreciation that you will lose driving a new car off the lot. And, it is much less than your $500-600 or more monthly car payment.
Kwik Kar at Craig Ranch is your McKinney and Frisco neighborhood Auto Repair Specialist. If it’s broken, we can fix it. However, we’d rather save you money by performing your preventative maintenance in our Kwik Kar Lube Shop. Either way, we are here to serve your Car and Truck maintenance and repair needs. Call us today!