Truck Paid Off vs Repair

[sounderella]

Alright, I'm going to preface this question by saying it may be extremely stupid for me to ask. You may even look at the situation and call it a "no-brainer", but I'm really struggling with this.

When it comes to cars, I have no tolerance for them acting up. Seriously, for as much as they cost I feel like you shouldn't have one ounce of trouble, but I digress. I know that's a fantasy world and stuff happens. Typically, with the cars I drive, I usually get rid of it when it starts giving me trouble and get another one. That's why this situation isn't a "no-brainer" for me.

Now I have a different mindset and we are trying to pay off deb. We've almost got my husband's truck paid off. It will be paid off in Feb with our tax refund. The payoff will be about $3K. Here's the kink in things: the truck just got sick and preliminary reports are indicating it's going to need a new engine. (It's irritating to me at 120K miles we're looking at a new engine!) So, new engine+labor is going to put us around $3K-$4K.

Currently, my husband and I commute on a daily basis together in my car. So we aren't put out with a sick truck. However, I can't predict a scheduling conflict or an emergency that may require one of us to go out of town leaving the other without a vehicle.

So here's my question: what is the smartest thing to do here? Go ahead and pay off the truck and scramble to get $3K-$4K to fix or do we fix the truck and continue payments until Dec 2014? My initial plan before the truck getting sick was to contribute that payment to our debt snowball once I got it paid off. The payment is $333.

Please be gentle in your responses and understand that I've never been in the situation to want to keep a vehicle that needed to be fixed, so this is kind of foreign to me.

I know it makes obvious sense to fix the truck, but I didn't know if it made more financial sense to get it paid off first.

[TheKayla]

When it comes to stuff like this think of one thing: what's the vehicle worth? Is it worth less than the amount it would be to fix it? To me, that's the point where I'd rather sell it, and use the cash and other savings to purchase a newer, more reliable car. Do you have other savings to purchase a new vehicle though? Could you go with one less vehicle for a while until you save up for a new one? I also think in these situations that in most cases -- vehicles are a want and not a need -- depending on your location of course. Most certainly, in nearly all situations more than one vehicle is merely a convenience. Could you go with one less truck for awhile while you appropriately save up for a new one, or rather fix the old one if you'd prefer to do that?

[greenskeeper]

year, make, model?

how many miles?

value of the vehicle?

what indicates it needs a new engine?

Those answers will help determine the best path to follow.

[bjl584]

As stated above, more info on the truck is needed. If it's worth more than $3 or $4K then, I'd probably fix it and keep driving it. You said that you are trying to get out of debt. Buying a new car with another 5 plus years worth of car payments won't help you be debt free.

[JoeP]

When it comes to stuff like this think of one thing: what's the vehicle worth? Is it worth less than the amount it would be to fix it? To me, that's the point where I'd rather sell it, and use the cash and other savings to purchase a newer, more reliable car.

Regarding the bolded part, there are two primary definitions of "worth."

One is the price someone is willing to pay you for your vehicle. The other is the amount of money you would need in order to replace it with a similar vehicle.

Take a look at what $4k comes down to in terms of car payments should you decide to get a loan. That's maybe 10-12 months! Personally, I'd rather drop the $4k once on a new engine and have something solid that will last years, as opposed to being locked into payments for 4 years.

If you replace the engine for $4k, keep making "payments" to yourself as if you had a car loan, and use that money for repairs that may come up, or toward a replacement vehicle if it comes to that.

I think part of the problem here is that the $4k looks like a big pile of cash you'd have a hard time parting with. In actuality, people don't feel the separation anxiety as much when that amount (and far more) is sliced into monthly installments in the case of a car loan. The good news is that you can make "installment" payments to yourself and enjoy the benefits yourself.

[snafu]

I've even more questions to add. How does the truck enhance your day-to-day living? Does DH regularly need to haul stuff that won't fit into a hatchback? What are operational costs like mileage and insurance? How often is a 2nd vehicle critical? Can a friend, colleague or relative come to the rescue once in awhile? Would it be more cost efficient to rent an economy car once in a while?