When to Buy a New Car vs Keep Old One
When Does It Make Sense To Buy A New Car?
It’s a dilemma I’m facing right now. I currently drive a 2007 Jeep Liberty. Within the next week, I’ll cross 200,000 miles on it. Three of the four power windows no longer work, which is a notorious Liberty issue that I, unfortunately, didn’t find out until after the recall period was finished.
I also have a 2008 Chevy Malibu, with much fewer mileage. I think we’re at about 110,000 miles on it. We bought it used to pay for a 2001 Oldsmobile Alero that was on its last legs. We’re currently paying on the Malibu, however, that will be wrapped up by the end of next year.
The Jeep still runs well, but it has a bevy of things working against it. The windows are a nuisance, but I can’t see spending hundreds of dollars in repairs on it for something I can live with. It’s not the family vehicle so no one is bothered by it but me. It gets pathetic fuel mileage, and as the vehicle gets older it’s mileage gets worse. The windshield needs replaced soon and the interior looks like a Mento’s & Coke challenge were held in it.
Is Another Monthly Payment Worth It?
I love not having payments on it. In fact, I can’t wait to get to a point like my father-in-law, who retired early by the way and pay for my vehicle purchases up front. He hasn’t financed a vehicle since the 1980s. That being said, I’d really like to drive something more economical and comfortable sooner than later.
If you’re wondering about when to buy a new car versus keeping an old one, the answer should be, what’s it worth to you?
If you have little to no debt, have amassed a healthy savings account or net worth, then you’re in a much better position than I am to go shopping for a car.
You’ll want to do some research on your current vehicle. Find out how much any repairs are that may keep it functioning well to get you by until you’re in a better position to buy. Some vehicle repairs may tip the scales towards needing a new vehicle simply because they are cost prohibitive.
If you have debt and just as importantly, have poor credit, then you’ll need to do your homework and find out what a new or even used vehicle will cost you in the long run. Will it hinder your chances to build an emergency savings account? Will it prevent you from other pressing items such as paying off bad debt like credit cards? Will the added payments put too much of a strain on your monthly budget?
Be ready to be sold to if you decide to buy.
Everyone’s situation is unique. The best I can advise is that if you do decide you need to purchase a vehicle that you do your homework first, before heading down to the dealership and speaking with a salesman. Remember, it’s their job to paint an everything-is-going-to-be-fine picture, regardless of what your actual situation says. You may want to contact your bank first, to see if you qualify for a lower interest rate than your dealership might provide.
Also, be sure to utilize online tools like Kelly Blue Book to determine if the vehicle you're looking at purchasing is being offered at a fair market value. The same goes for the vehicle your trading in, you’ll want to know what it’s valued to help ensure you're given a fair deal when you exchange it.
Financing a Vehicle Won’t Make Achieving FI Easier (In Most Cases)
If your working towards financial independence, like I am, you’ll want to determine how a new or used vehicle purchase plays into your goals. An expensive vehicle, new or used, can chew into a large portion of your income each month and could be quite prohibitive to your goals. It’s also possible that purchasing a vehicle could be beneficial, especially if you use it for work or transporting clients. Impressions matter, but there should definitely be some weighing of the pros and cons, as well as a real potential value determined before any contract is signed.
I’ve decided to push my Jeep Liberty until it can’t go anymore, as long as it isn’t a safety hazard to myself or others and that any immediately needed repairs aren’t cost-prohibitive and outweigh the financial reasons to keep it.
Sure, we all like that new car smell, and let's face it, newer vehicles are usually more fun to drive unless we’re talking a souped-up classic.
Best of luck with your decision to buy a new car or keep the one you have!