Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Mar 1, 2013

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The decision of whether to continue repairing a used car or to buy a new one comes down to the individual consumer and their unique financial situation.

Jonathan Kazary, general manager of New Jersey-based Kenwall Auto, said the decision to keep or buy is simple and straightforward.

“If the owner is continuing to invest in ongoing repairs without seeing a light at the end of the tunnel, then it’s clear that is it time to buy — no matter if it will be a used or new car,” Kazary said. 

Howard Fleischmann, owner of Arizona-situated Community Tire Pros and Auto Repair, said the average age of a car on the road is 11 years.

When customers come into his shop with questions, he recommends a simple plan. He said when repair costs are equal to half the cost of the vehicle’s value, that drivers should purchase a newer vehicle.

Davis Speight, general manager of Texas-based Starwood Motors, agrees that a formula is needed.

He asks himself one question before proceeding with repairs: “Will the cost of the repairs out-weigh the value of the car?”

On the other hand, Kazary said a formula is not always exact because each customer is unique. Instead of focusing solely on a price point, some of his customers have a sentimental attachment to their cars.

“That emotional connection will ultimately drive the decision even if it’s not the right one,” he said.

Fleischmann agrees that emotional attachment is a strong force in the auto industry. He said customers who name their cars have a strong attachment and should prepare accordingly. For these drivers, they should stay updated on car maintenance and establish a car fund in case an emergency occurs.

Holding onto an old car is not always a bad decision, especially with the quality and durability levels increasing.

“Manufacturers have been building vehicles designed to go many more miles than the vehicles of yesterday,” Fleischmann said. “It is not unusual for us to be servicing vehicles with 250,000 or 300,000 miles on them without major expense issues.”

The benefits of keeping an older car are typically financial reasons.

Fleischmann said older cars typically offer a lower insurance payment. Additionally, if the auto loan is finished, there is no monthly payment to factor in.

Speight said there is a value for “financial freedom.”

“Not having to worry about making a car payment certainly is a load off [one’s] shoulder when living on a budget,” he said.

Sometimes the “new” or “old” factor depends on the person. One of Fleischmann’s customers begrudgingly had to attend an hour-long class on how to use the new technology in her car.

“Technology of new vehicles can be exciting and/or frustrating,” he said.

But sometimes it is logical to upgrade to a new car or at least a newer used car.

Fleischmann said new cars bring with them little to no repair costs for the first two years, updated features, as well as a “status symbol of success.”

But he doesn’t understand why new cars should be equated with real wealth.

“Just about anyone can make a payment and take money away from retirement plans,” Fleischmann said.

In the end, consumers must personally decide if a new car is worth the new monthly auto loan bills.

Kazary said ignoring a car’s health can become a “huge inconvenience” for consumers due to added costs and lost time spent in a repair shop.

“With an older car you never know what is in store for the next day, week, month and what repairs might be around the corner,” he said. “Sometimes a new auto loan and the subsequent monthly bills override the cost of repairing a used vehicle.”

Before proceeding with a new car, and taking on a new auto loan agreement, consumers should confirm that the vehicle is realistic for their lifestyle.

Fleischmann said the first consideration is budget. He said people should not “play games” with themselves about saving money on gas and repairs until they evaluate their budget and what they can afford for a new auto loan agreement.

New car purchases should fit a consumer’s budget, the type of driving they do on a regular basis, and the city in which they live. Having a gas-guzzling Hummer in Florida is not necessary, but neither is a convertible in Alaska. Buyers should be aware of the use of the car, which will ensure it suits them for years to come.