Buying a New Car: Signs It's Time to Buy
Knowing when it makes financial sense to purchase a new vehicle is important. While many financial advisors counsel their clients to hold onto their car until the wheels literally fall off, doing so can be expensive as breakdowns and repair costs occur with greater frequency. Although you may be reluctant to get back into monthly car payments, there are some telltale signs that it has become impractical to keep an old beater running. Here are five that demonstrate it is likely time to let your old car go and buy a new one.
1. Repairs Cost More Than the Car Is Worth
This is the maxim most often cited when doing the financial math on whether it makes sense to keep an old vehicle operating. When the needed repairs cost more than the car is worth, you’d be best to scrap that old car and buy a new one. For example, if you need to spend $2,500 to repair the transmission and the car is only worth $500, then it would be foolish to pay to have the vehicle fixed as you’d then be out $2,000. There’s also the “tire test.” When it comes time to put new tires on the vehicle, ask yourself if the car is worth the cost of a new set of tires. If the answer is “no,” than you should head to a car dealership. Remember that if you are unlikely to see a return on investment in a car, it is time to send that old car to the scrap heap.
2. The Car No Longer Passes Emissions Tests
The U.S. Environmental Protection Agency (EPA) requires that older cars meet environmental emissions standards. And a clear sign that your car has become outdated is when it will no longer pass current environmental emissions tests. While new model vehicles have numerous “drive clean” technologies that make the emissions coming from the tailpipe healthier for the environment, older model cars do not have these technologies and many will not pass emissions tests that are required when license plates are renewed. And it is rarely worth the cost to have new technology added to a vehicle so that it passes an emissions test. Better to put that money towards a new vehicle. Many extremely old cars are not allowed, by law, to take an emissions test, rendering them obsolete.
3. The cost to insure the vehicle keeps rising
Another sign not to be ignored is how much it costs to insure an older car, truck or sport utility vehicle (SUV). As vehicles age and pile on the miles, they can become more expensive to insure. Newer cars come equipped with a variety of high-tech safety features that allow them to qualify for lower insurance premiums.
Even with a good driving record, an older car can cost more to insure – especially if it's a model that's popular with car thieves because its parts are in great demand. Using it to commute to and-from work can also add to insurance costs. Paying attention to the insurance premiums on your car is just as important as the other costs associated with operating the vehicle, such as repairs. You don`t often think of your insurance premium when deciding whether it's time for a new car, but you should.
4. Breakdowns and Repairs
An occasional breakdown on an older car is to be expected and paying for needed repairs every once in a while is reasonable – especially if you no longer have car payments. But when a car starts breaking down with increasing frequency, it is likely time to get a new one. As a general rule, you don’t want to experience more than two breakdowns a year. And by breakdown, we mean incidents that prevent the car from being driven and require major repairs. We’re not talking about having to replace the windshield wiper blades or the battery. We’re talking about replacing radiators, exhaust systems, and fixing engine malfunctions. If you get to a point where your car is breaking down every two or three months, then you’ve got an expensive problem.
5. When Safety Is an Issue
No matter how well you maintain a car, eventually it will become unsafe to operate. Not only will the car become unreliable and prone to breakdowns at potentially dangerous times, such as when driving on a freeway. But older cars do not have many of the advanced safety features that are found in newer models. Side airbags, electronic stability control, rear view cameras, blind spot monitoring and forward collision alerts are all fairly new additions to vehicles. While it can be argued that many of today’s safety features are optional and not necessary, it can also be argued that a car that is so old the muffler falls off is not safe to operate. If you, or the passengers in your car, feel uneasy when in your vehicle, than it is time for an upgrade.
The Bottom Line
While older vehicles offer some financial advantages, those benefits diminish over time. Eventually, the money you save not having car payments gets eaten up by repair costs, higher insurance premiums and needed upgrades. The bottom line is that the older a vehicle, the more expensive it becomes to keep on the road. Eventually, even the biggest spendthrift must acknowledge that it would be more affordable to buy a new vehicle.
Buying a New Car: Getting Started