[Make sure to check out Part 2: “Wow, Yeah, Unfortunately We Need to Go Car Shopping — What Now?“]

So we just spent $1150 on car repairs… oh, and the trade-in value for our car is roughly $500 (from a dealer; we could surely get quite a lot more selling it ourselves, but probably still less than $1150). When does spending more money on repairs than the value of the car make sense financially? Let’s explore [cue evil laugh].

This article is in no way sponsored by anyone, nor do we even have affiliate links in it. Let’s get real: the worst part about buying and owning a car is constantly dodging people trying to rip you off. Fergus and I are still exhausted after weeks of being done with the whole process of car shopping; we’re not about to add to someone else’s stress by trying to sell you something ourselves. Besides, we’ve already established we suck at selling.

When Should You Consider Replacing Your Car?

What is the breaking point where the cost of repairs on an old car no longer make sense? Some insane people might say you should get a new car whenever the warranty is up or before the first big repair. These people enjoy throwing their money into a magical depreciation dimension. Do not listen to these people.

More reasonable people give an answer like “whenever the cost to repair is greater than the value of the car OR greater than annual car payments on a new car.” This advice is at least better, but not good enough for the Fluffsters!

Thing is, there are a shit ton of factors when looking at car costs, and these factors will change drastically depending on where you live. Take insurance, for instance.

Insurance Costs

We currently pay $401 per year in car insurance. That’s pretty damn cheap for Massachusetts, especially near Boston. Best driver ratings, old car, fairly limited insurance (because, hello, old car — don’t worry, we don’t skimp on liability coverage), low mileage discount (<5,000 miles annually), we pay for the year upfront, and insurers officially rate me as an adult. First moving to the Boston area as a 21-year-old, and living closer to the city, insurance was just over a thousand dollars annually, if I recall correctly.

Imagine my surprise when I was quoted $865 to insure a 2014 Honda Fit. Instantly, that would mean at least $464 more, annually, if we bought and insured that car.

Repair or Replace? First Year Tally
Repair		Replace
$1150	All-in repair cost	$464	Insurance bump

For someone living in the Middle of Nowhere where I grew up, the insurance increase would be far less drastic, especially considering advanced safety features could help lower the premium somewhat.

Of course, some factors are a little more universal. Now to tackle the big one.

Depreciation Costs

Depreciation costs are notoriously high for new cars. Meaning, as soon as you drive that shiny new SUV off the lot, you have instantly lost money. We were never talking buying a new, new car, though. Depreciation can’t be that bad, can it?

via GIPHY

If we were looking at a much older used car, depreciation gets to be not such a big deal. But we had our eyes on a youthful 2013-2014 Honda Fit because “safety” (more on this later) and magic seats (also reliability, cost, versatility, and MPG, but mostly because MAGIC if I’m honest).

Edmunds has this really nifty tool called True Cost to Own® that is super easy to use and understand. I really wish it went back to older models than 2011 and let you alter assumptions, but other than that, it’s a pretty genius tool.

Wow. Okay, then.

Let’s add $2,689 in depreciation costs for the first year to our tally then.

Repair or Replace? First Year Tally
Repair		Replace
$1150	All-in repair cost	$464	Insurance bump
		$2,689	Depreciation

Excise Tax

Since the local government seems to think our car is worth $2,000, we pay roughly $50 a year in excise tax. If we had actually bought the Honda we were looking at, this would quintuple.

Repair or Replace? First Year Tally
Repair		Replace
$1150	All-in repair cost	$464	Insurance bump
		$2,689	Depreciation
		$200	Excise Tax bump

Surely the New(er) Car Has Some Financial Pluses?

Yep, it sure does. Just not a lot, at least for our case. Two big pluses would likely be lower gas and maintenance costs. Too bad we drive less than five thousand miles a year and have one of the most reliable/problem-free cars to compare against. We’ve averaged just under $400 per year in repair costs for the past 6 years, including another large 1k+ repair several years ago.

Still, that shiny red Fit would likely bring some savings. Time to add the (relatively paltry) numbers to the board.

Repair or Replace? First Year Tally
Repair		Replace
$1150	All-in repair cost	$464	Insurance bump
$100	Fuel Diff	$2,689	Depreciation
$150	Maintenance Diff	$200	Excise Tax bump

Yeah, so now we don’t seem so crazy, do we?

Could We Have Saved Even More Money?

Probably. So that $1150 in repairs was for a brand new catalytic converter, resonator, muffler, and all the in-between bits. Below are the part-by-part quotes from the mechanic and related part-only costs I found with some online searching. Let me know if any of the online quote numbers seem off.

Part	Mechanic Quote (Labor Incl.)	Part Cost (Online Quote)
Catalytic Converter	$615	$376
Resonator	$284	$182
Muffler	$324	$177
Misc	($73) [“discount”]	$27 [gaskets, etc]
Total	$1150	$762

As near as I can tell, that would mean roughly five hours of labor (assuming ~$80/hour), or the parts were more expensive (possibly Original Equipment Manufacturer (OEM) vs. aftermarket parts). Almost assuredly, if we had the luxury of a bit more time, we could have found better deals on parts ourselves. This seemed to be the general consensus when we asked on the MMM forums.

One of the disadvantages to having a single car household is that you often can’t afford to lose your car for an extended period of time, and DIY methods become riskier. With more time, we likely could have saved several hundred dollars on the cost of repairs.

Older, Used Car?

Buying an older used car could have also been an interesting endeavor. If we got, say, a 2005 model instead of a 2014 model. Depreciation and insurance costs would be much less, and the “worth it” equation could actually make sense for replacing vs. repairing if we bought a much older used car.

The downside is a little more uncertainty in the reliability of the car, and of course the fact that any older used car may have its own $1150 repair coming up soon. You can, of course, get any used car inspected before purchasing (and should), but unless you yourself know a fair bit about cars, inspections could add up and are time-consuming. Plus, we hate car shopping.

But What About Safety?? Think of the Fur Child!

This is something we struggled with quite a bit. We read tons of articles and studies by the Insurance Institute for Highway Safety, and when we were seriously considering replacing our car (i.e. before we really looked at the numbers), we had it in our minds that at the very least we should get a car with Electronic Stability Assist.

Saying no to fancy new safety tech really came down to two reasons for us:

1. There will always be new safety advances, which is awesome, but this doesn’t mean we should all buy a new car every year. We were perfectly happy with our old Camry before the big repair bill came up, so should we suddenly be displeased?
2. Driving habits are so much more important than having the latest and greatest safety features. Two friends of mine come to mind when I bring up driving habits. One is a typical “Masshole” driver, while the other drives as if she actually wants to live until tomorrow. I would feel so much safer riding in a rust bucket with this latter friend than in a tank of an SUV with the former. The best thing we can do for our own personal safety is to practice safe driving habits and say no to distracted driving. Side benefit: Also free!

No, But Really: When Should I Replace My Car?

There are some cases, for sure. Actually, this article does a wonderful job of going through very sane reasons. If you have to fix something safety-related on your car every month, for goodness sake, please look into your options. You are loved and everyone would really rather if you didn’t die. Your wallet will also be happy if you stop throwing money into a lemon.

Many people seem to lean towards replacing, and even buying a brand new car if they can’t immediately afford the repairs. There are some ways around this, and Credit Sesame has a comprehensive article that walks through your options and how to avoid predatory lending practices.

If you have an older car, it’s a good idea to keep this in mind for budgeting and emergency fund purposes. In our Mint budget, we set aside $250 for car & transportation expenses, even though we historically spend ~$150/mo all in (including parking, tolls, registration, etc, all in). We rollover that budget each month and currently have $4,500 set aside for any major repairs and/or eventual replacement costs.

What Would You Do?

Do you think we’re crazy? Have you had to deal with similar decisions in the past? Does anyone actually like shopping for a car? Let us know in the comments!

Here are the results from the MMM forums poll, for anyone curious (repairs were thought to be $1500 when we wrote that up):

Be sure to subscribe for blog updates to see our follow-up article on lessons learned about buying a car from when we almost bought a car — including tips from drug dealers (no joke)!