Keep old car or buy new

[MKKShah]

Ladies and Gentlemen...here I am, asking the age old question again. Keep old car or buy a new one?

I have a 12 year old luxury sedan (that I bought used for $20K w/36K miles 8 years back). The car now has 160K miles, and has the following issues:
- subwoofer not working (replacement cost $400)
- a side mirror that is decaying, will be useless in a couple of years ($500)
- Potential transmission rebuild withing the next year ($2500)
- Engine is burning oil as well as leaking coolant, although at a manageable pace(one quart each pa).
- AC("climate control system") works for now, but may give way soon. Not sure of the cost of repair/replacement.

I have replaced all belts, hoses, water pump and struts at 150K miles. But I am worried about radiator, alternator, headlights etc. failing due to age.

I believe in holding a car and driving it into the ground, to get the best value out of the vehicle. However, the thought of being stranded on the side of the road without warning (due to the transmission issue) worries me, even though I have roadside assist through insurance, and I generally don't drive through unsafe neighborhoods.

I am debating keeping the old car vs buying either a used luxury car or a new mid size SUV (both under $27k). Keeping the old car means expenses up to $5000 over a 5 year period. Buying new means shelling out $22k (assuming $5k for trade in value of my current car), but driving a new and reliable car, one that I can keep for at least 10 years.

I am paying $300 in insurance for 6 months. This will become $480 with the newer vehicles.

My finances are not too bad. Net assets: $215K. Total HHI: $110K pa, total annual household expenses: 38K. No debt.

What would you do if you were in my shoes? Buy a new vehicle (either used luxury sedan, or new midsize SUV). My choice is only between keeping the old car vs getting either the luxury sedan or new midsize SUV.

Please help me out, as I'm really confused ever since I noticed the issue with my car's transmission.

Thanks,
MKKShah

[bjl584]

How much of your $215K net assets are cash?

I'd probably look around for a gently used car if I were you. Financing may make sense for cash flow reasons, but we will need more info and detail on the breakdown of your assets.

[Blessed]

Can you write a check and pay cash for a newer car? That would be the deciding factor for me personally.

[MKKShah]

Turns out, net assets comes out to 277K, of which $115K is available for penalty free withdrawal.
(the above does not include home since it has a mortgage, and the equity is negligible).

I can write a check, but for a new car, might go with 0% financing.

[MonkeyMama]

Can you write a check and pay cash for a newer car? That would be the deciding factor for me personally.

Agreed. Whether you finance at 0% or not, if you have the cash readily available, then go for it. You kept the car 8 years, which is longer than most.

It would be different if you were up to your eyeballs in debt and living beyond our means. It seems you have ample means to upgrade. Buying a $22k vehicle to drive for 10 years sounds pretty reasonable.

I am personally of a "spend less/keep car longer" mind, but I also have a much smaller income, and a mortgage I am tackling. We also don't put so many miles on our vehicles (about half as much). So this is probably why I think it's reasonable to stop sinking money into the car with 160k miles, though I'd generally keep a car much longer than 8 years. You may want to consider going newer/less miles, so the next vehicle will last longer, but depends on the plain old math.

[phantom]

I think it's a good idea to get a new car whenever lots of things start to go wrong with the old one all at once. When little things are breaking one at a time and you can keep fixing them, it's hard to know when it's time to bail. But, when there are a few problems stacked up, it makes for a clearer sign that your car is finished. Since you have the cash for a new car, I think that getting one now makes sense.

Just out of curiosity, why used luxury sedan or new SUV? Is it just a matter of having a certain price point in mind? Do you feel an SUV holds its value better than something with the word luxury in it? Or is there some other reason? Since you're willing to go for a used car, I would have thought you'd consider a used one no matter what the type.

[MKKShah]

Just out of curiosity, why used luxury sedan or new SUV? Is it just a matter of having a certain price point in mind? Do you feel an SUV holds its value better than something with the word luxury in it? Or is there some other reason? Since you're willing to go for a used car, I would have thought you'd consider a used one no matter what the type.

This is purely due to personal preference. I like luxury cars (Lexus/Acura/Audi). But with upcoming family changes, an SUV may be more in order. So the choice for me boils down to one or the other.

Besides reliable entry level cars like Civic/Corolla are around 18K (new) anyway. If I can get a luxury for $5-7K more (a cost that is spread over 8-10 years). I spend at least 40 mins a day in my car, and will likely do so every day for the next 10 years....why not a little luxury? or so goes my thinking.

I am simply not able to come to terms with the fact that a newer car will mean $500 monthly for the foreseeable future (5 years) or a huge hit on my cash reserve.

The risk in holding on to the car (and taking the approach of fix stuff as they break), is that when a major overhaul (engine or transmission) is needed the car may just have to be junked, while I may still be able to get $4000 to $5000 right now in a trade in.

The good news is that my mechanic tells me that the current problem may be due to worn out motor mounts which can be done in well under $1000.

Searching the internet it turns out "click and clack" advice that it is always cheaper to fix an older car that buying new, with one exception : rust.

[MKKShah]

As it has been a long time since the purchase of your car so instead of making so many repairs you should go for a new one available with advanced features.

I agree. The temptation seems almost irresistible. However when I think of what features I would want in a newer car, I really can't think of much. My old 01' car has all the safety features I need (front / pass side airbags), ABS, traction control and drives like a champ in snow.

Even though the subwoofer has failed, it still has 12 working speakers. So that's something I can live with.

When you look at most newer cars I notice a few things. Cars have generally become larger, slightly more fuel efficient, and are loaded with junk that I simply don't care for (like nav systems, Sync or other touch scree systems etc).

Browsing the internet for solution to the current problem I have with my car, I find folks with much younger cars (06's, 08's etc) reporting the very same problem. So a newer used car does not seem to be a guarantee, although it is likely to be more reliable.

So the confusion continues. For now, I am reconciling myself with keeping the old car. I also don't want almost 10% of my net worth standing as a depreciating asset in the parking lot.

[snafu]

1st vehicle category needs to be sorted if family changes impact the choice of car type. Will you need to seat 5, 7, or 12 people/kids around regularly? Traditionally, late January is a terrific time to buy a car.

Is it worth the upfront cost of determining whether your car needs motor mounts or far more expensive work. An 8 y/o car could have parts from the part-out/wrecker outlet rather than brand new mirror and sound system. After 8 years, AC may benefit from the kits sold at AutoZone type suppliers with the caution that instruction must be followed exactly. A rule of thumb is it's rarely worth spending more in repairs than the car value in KBB.

Somethings to consider: What is the increased cost of insurance for the first several years of a new/newer vehicle you select. Some have out-of-portion costs possibly because they are more likely to be stolen. The hassle of that is horrid.

Is the depreciation factor that takes effect as soon as you drive the car off the lot worth it to you? Like others, I suggest a low mileage 2 y/o car.

Is it important is to you to let others know you drive a Lexus/luxury car? What would be your choice in the SUV category? What features of cur current car do you use and enjoy? Are there features that you wouldn't miss? No point in paying for features that are unimportant, what features would you like to add?

[MKKShah]

1st vehicle category needs to be sorted if family changes impact the choice of car type.

Thanks for bringing this up. I think a sedan should suffice for me for now. Right now, we may have at most 5 people in the car (including a infant car seat). An entry level SUV like RAV4/Escape isn't necessarily any better than a family sedan in this regard. So I think for my current purposes, a slightly used Luxury Sedan is what I need.

After 6 years of so, I will need a 6 seater, and I will go for a mini van then. So an entry level luxury sedan it is for now.

Traditionally, late January is a terrific time to buy a car.

Thanks for bringing this up. I have always hand an inkling that winter is a good time to buy a car.

Is it worth the upfront cost of determining whether your car needs motor mounts or far more expensive work. An 8 y/o car could have parts from the part-out/wrecker outlet rather than brand new mirror and sound system. After 8 years, AC may benefit from the kits sold at AutoZone type suppliers with the caution that instruction must be followed exactly.

The upfront cost of determining if this is motor mounts or not will be more than around $100 or so, plus 1-2 hours (in multiple trips to the mechanic, since they may or may not be able to reproduce the issue).

I agree about the mirror and the AC.

A rule of thumb is it's rarely worth spending more in repairs than the car value in KBB.

I am not sure I agree with this. The KBB value enters into the picture only when I plan to sell the car. Considering the age of this car, I am not planning to sell it, and would like to drive it until it dies. So The only comparison with respect to a new(er) car will be the cost of the newer car vs repairing the current one. One factor in favor of keeping the current one is that a newer car (in the $20-25K) range, will depreciate $3-4K each year (if you go by the KBB route) in the first few years, whereas even if I replace everything that is wrong with the car it is just around $4-5K, and the car "could" potentially we roadworthy for another 5-8 years.

Somethings to consider: What is the increased cost of insurance for the first several years of a new/newer vehicle you select. Some have out-of-portion costs possibly because they are more likely to be stolen. The hassle of that is horrid.

The increased cost of insurance is insignificant in my case. I got an exact quote from my agent, and the cost goes up by about $20 per month.

Is the depreciation factor that takes effect as soon as you drive the car off the lot worth it to you? Like others, I suggest a low mileage 2 y/o car.

I mentioned depreciation above only for comparison. It is not a factor for me at all. I believe buying a car and running it into the ground. That is where the most bang for buck is(I think). So it is either a brand new car, or a slightly used car.

I have noticed that, when it comes to new car vs slightly used car, it makes more sense to buy new in cases of cars like Civic, Corolla, Accord, Camry, Altima etc. These brands hold their value to an extent that a slightly used low mileage car does not offer a substantial discount over a new one.

However, in the case of Luxury cars, the depreciation in the early years is still so steep, even as the cars are typically well built,and so it makes better sense to buy slightly used. A 4 year Audi , Lexus or BMW still drives like new and typically does not have too many issues. Here buying slightly used works, or so it seems.

Is it important is to you to let others know you drive a Lexus/luxury car? What would be your choice in the SUV category? What features of cur current car do you use and enjoy? Are there features that you wouldn't miss? No point in paying for features that are unimportant, what features would you like to add?

I don't care to show other people what I drive. However, there is a marked difference in handling between a luxury sedan, and a non luxury sedan of the same class. The difference is typically unmistakable. My 12 year old car handles better than most new non luxury sedans. Nowhere do I notice this more than when I drive back from the Airport after a trip, during which I would have rented a car.

Another thing is that I believe in buying a car and holding it. So considering that I will spend at least 40 mins a day, every day for the next 10 years or so in this car, why not a little luxury? The extra cost of a luxury car comes out to 5-8K over a comparable non luxury sedan. This cost amortized over 8-10 years comes out to way less than $100 per month, and I am willing to pay that for the extra "luxury".

Things important to me are: Handling, Power, space, seat comfort (including heated seats), reliability, somewhat appealing interiors. A functional radio, tape and A/C are also required.

Although my car has never broken down when driving, given the potential problems lurking, it is not out of question that a break down can happen. So reliability is the one thing that my car may not have going forward. So the real question boils down to this: Is reliability worth 25K? or is 5K spread out over the next 4-5 years on the current car better? (with the risk of course that either the engine or transmission completely fails).

[josetann]

Subwoofer doesn't have to cost $400. Is it just the subwoofer, or are you not sure what the problem is (wiring, radio itself, etc.)? Cause if it's in the radio itself...I can see it becoming a $400+ repair easy. And the mirror...what exactly is wrong with it? If it's just the motor itself, surely it wouldn't be $500. If it's the mirror itself...check junkyards, ebay (careful of aftermarket...some are great deals, some are utter crap with plastic film as the "mirror"), etc.

Just pure numbers...looks like you'd be better off keeping the current car. You're looking at spending $27k or so for what will likely be a four year old car, and expecting it to last another eight or so years (just like your current car has). At which time you'll be looking at the same scenario...spend $5k or so (in today's dollars) to repair it, or sell for $5k and buy another car for $27k (again, today's dollars). So, to get another eight years of life out of a car, you can either spend $27k - $5k for the current vehicle, that's $22k. Or spend $5k keeping your current car on the road. That's a difference of $17k. Now...keeping the current car will mean it'll be worth less than a newer car would at the end of eight years...but even if it's worth $0, that's only a loss of $5k.

Anyways...my really crude back-of-envelope math says that if you stick with the current car, you can spend up to $12k in unanticipated repairs, and still break even. And that's assuming no resale value, and ALSO assuming that the newer car wouldn't need a single repair. Real world numbers are even more in favor of keeping the current car.

Personally, I'd keep the current car, do the necessary repairs (and don't skimp...transmission and motor stuff is important), and keep an eye out for the unnecessary repairs (surely the subwoofer and mirror can be replaced for much less).

BTW, you can get a luxury station wagon. And since they're not quite as popular in the US, you can probably pick one up for less than a regular sedan. Might not look as cool...but the handling and reliability are just as good.

[MKKShah]

Subwoofer doesn't have to cost $400. Is it just the subwoofer, or are you not sure what the problem is (wiring, radio itself, etc.)? Cause if it's in the radio itself...I can see it becoming a $400+ repair easy.

To replace the subwoofer with an aftermarket part, I will have to install a new amplifier. So a new (decent) sub = $120, amp $100 and installation labor $80, so total runs about $300. OEM subwoofer is $360, and the mechanic said he would install it for me for $40 labor. So the $400 came from there.

The radio, wiring, deck, are all in fine shape, as are the remaining 12 speakers.

If it's just the motor itself, surely it wouldn't be $500. If it's the mirror itself...check junkyards, ebay (careful of aftermarket...some are great deals, some are utter crap with plastic film as the "mirror"), etc.

Yes. It's the mirror itself. Thanks for the suggestion. This is exactly the kind of innovative idea that one needs. I agree that the replacement need not be $500 (the motors etc work fine.) I will try to improvise a solution.

Just pure numbers...looks like you'd be better off keeping the current car. You're looking at spending $27k or so for what will likely be a four year old car, and expecting it to last another eight or so years (just like your current car has). At which time you'll be looking at the same scenario...spend $5k or so (in today's dollars) to repair it, or sell for $5k and buy another car for $27k (again, today's dollars). So, to get another eight years of life out of a car, you can either spend $27k - $5k for the current vehicle, that's $22k. Or spend $5k keeping your current car on the road. That's a difference of $17k. Now...keeping the current car will mean it'll be worth less than a newer car would at the end of eight years...but even if it's worth $0, that's only a loss of $5k.

Exactly. This is my thought as well. The last 8 years whizzed by, and the next 8 will likely too. And with a newer car I will be in the exact same situation as I am today, then. I am not sure replacing one's car every 8 years is exactly a road to riches.

Anyways...my really crude back-of-envelope math says that if you stick with the current car, you can spend up to $12k in unanticipated repairs, and still break even. And that's assuming no resale value, and ALSO assuming that the newer car wouldn't need a single repair. Real world numbers are even more in favor of keeping the current car.

I am interested in knowing how you came with the $12k number. If this is true, then it is awesome, because, for just $8k today, I can replace the engine, the transmission and just about every other part that I am thinking could fail. But the fact is I don't need a new engine, or a new transmission just yet. Just worried that I might need it in the near future, and if I wait until such time that a major repair is needed to make the car run, it would could only be sold for parts.

But if you can justify the $12K, I think I have a heck of lot of cushion.

BTW, you can get a luxury station wagon. And since they're not quite as popular in the US, you can probably pick one up for less than a regular sedan. Might not look as cool...but the handling and reliability are just as good.

Wow...This is a gem. I used to think station wagons cost more. I agree that their handling would just be the same, and will have greater function utility for me (and I don't care who thinks what..).


So it all really boils down to how you came up with the $12k number.

[josetann]

To replace the subwoofer with an aftermarket part, I will have to install a new amplifier. So a new (decent) sub = $120, amp $100 and installation labor $80, so total runs about $300. OEM subwoofer is $360, and the mechanic said he would install it for me for $40 labor. So the $400 came from there.

Me, I'd probably look at the aftermarket part. Will it perform just as well? Any way you can do a test listen (note, unless it's in the same kind of car with the same system, it'll be hard to judge exactly how it'll sound in your car)? I'm just thinking...if it goes out again, it'd be much easier to replace the sub/amp/whatever with a cheaper aftermarket, if you already had the aftermarket parts in there. Plus keep an eye on ebay...might find the parts for even less.

BUT...I also know that messing with any part of the sound system in a luxury car can have unforeseen consequences (they really do tie all the parts together). Do a quick google at least...are other people replacing the subwoofer with aftermarket parts reporting odd problems (anything from the radio not working, to trip computer acting haywire)? Then stay far, far away, and keep it oem. Not worth the hassle.

So it all really boils down to how you came up with the $12k number.

I got the $5k in repairs from this:

I am debating keeping the old car vs buying either a used luxury car or a new mid size SUV (both under $27k). Keeping the old car means expenses up to $5000 over a 5 year period. Buying new means shelling out $22k (assuming $5k for trade in value of my current car), but driving a new and reliable car, one that I can keep for at least 10 years.

So...you'll be out $22k if you purchase a new car today, and $5k (in repairs) if you don't. A difference of $17k. Now...after eight years...if you had bought the newer car, you'd be left with a car (that needs repairs) that is worth $5k (in today's dollars); if you kept the older car, and really did run it into the ground, the lowest amount it'd be worth is $0 (I like looking at worse case scenario). Keeping the older car "costs" you $5k, gotta subtract that from the $17k that it saved you...so that's a savings of $12k.

That means, after your initial $5k in repairs, you could spend an additional $12k on that older car over the next eight years before you enter the "would have been cheaper to buy a newer car" territory. $12k would easily pay for two MAJOR repairs plus rental car costs. In fact, you could total the car, buy another one that was slightly newer (paying say, $8k), do some moderate repairs on it (another $3k)...and STILL come out ahead.

I can completely understand being worried about reliability. If $5k would make it reliable, and it hasn't been stranding you on the side of the road, I'd keep it. If it became unreliable...well that'd suck, but hopefully it would have given you at least 3-4 additional years of reliable service.

Here's another way to look at the numbers. You're looking at spending $22k every eight years for a reliable car ($27k minus $5k trade-in). That's $4,400/yr for a reliable car. As long as you can keep the average below that number, keep your current car (yes, this year you may spend $5,000, next year you may spend $500). We haven't even looked at insurance costs yet...for the first few years or so, that's another $360/yr that the older car is saving you (eventually it'd balance out as the newer car depreciated and rates went down).

Wow...This is a gem. I used to think station wagons cost more. I agree that their handling would just be the same, and will have greater function utility for me (and I don't care who thinks what..).

Things may have changed in the past few years, but I doubt it. Station wagons in the US just aren't "cool". SUVs are, crossovers are, even minivans kinda are. But not the station wagon. Ignore KBB; check ebay (specifically, completed listings) and see what they're going for. Last time I checked, wagons were no more, and often less, than the same model sedan. And in most cases they were considerably cheaper than a comparable suv or minivan. Now, I did once find a luxury SUV model that was priced much lower than anything halfway comparable...but further research revealed why (#1, it was a true SUV, meaning it didn't handle that great on smooth roads, #2, gas mileage was atrocious, #3, not that reliable). Just keep an open mind and cast as wide a net as possible. Requiring a 2008 Mercedes R320 with leather interior will severely restrict the kind of deal you can get. But requiring a 4-6 year old reliable luxury vehicle that seats at least six and gets decent fuel mileage...much better chance of finding a good deal.

[MKKShah]

Ok, I just did a test drive of a newer luxury sedan. Just to see where I am with my car vs a newer one. And the verdict is keep the old car. Almost nothing in the new car appeals to me enough to spending $27K (that's the total cost after trade in. The dealer only offered my $3k).

The new car (same make and model as mine) had slightly more power, a little more interior space (not a factor we are not that tall, and the room in the old car is sufficient). That's it.

I will be fixing the car for about $400 now and fix the rest of the cosmetic issues like mirrors, subwoofer etc as DIY projects. There are good youtube videos showing how to do them.

Given the amount of work already put into the car, I think I should be ok for another 4-5 years with just regular maintenance. If and when a big ticket item like transmission or engine fails, I will go for a newer car. Hopefully it is five years!

[BostonMike]

Check Ebay or craigslist as parts for these cars are frequently sold there. I've routinly purchased parts secondhand that were available only at the dealer for $700 or so. I paid $40 or so for a used part, and it worked fine. The subwoofer you need might just be able to be bought for $50 or so and replaced yourself.