Here’s how to make that decision.
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Car Prices and Insurance Costs
It’s a tough call. The cost of cars, both new and pre-owned, has surged over recent years. Monthly car payments have climbed as well. That’s partly due to higher interest rates and partly because the typical vehicle price has increased.
New vehicles now average $48,641, per CarEdge. Over the past decade, manufacturers have prioritized SUVs and higher-end models, leaving fewer entry-level vehicles (new cars priced under $23,000). They still exist, but they’re rarer.
Consumer Reports notes the average used car price is around $26,134, with the average interest rate on a used-car loan just above 12%.
To add insult to injury, auto insurance premiums have risen too — the average full-coverage policy now costs about $212 per month.
Even with pricier vehicles, elevated interest rates and rising insurance, new-car sales remain solid. Meanwhile, the average age of light vehicles on U.S. roads climbed to 12.5 years in 2023. Older cars keep repair shops busy and push up demand and prices for replacement parts.
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How to Decide Whether To Repair or Replace Your Car
Deciding whether to visit the repair shop or head to the dealership depends on a number of factors. Below we’ll dig into each one.
What To Consider When Deciding Whether To Repair or Replace Your Car
Things to weigh when making your choice:
- Outstanding loan balance versus owning the car outright
- Vehicle market value compared with projected repair expenses
- Significant repairs already completed versus future repairs on the horizon
- Your present financial situation
- How much useful life the car likely has remaining
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Assess Your Car’s Value
Estimating your car’s value is straightforward. Use online valuation tools like Kelley Blue Book, Carfax or Car and Driver. Also consider: do you still owe money on it? How big is your loan, and is refinancing an option?
For example, online tools valued my vehicle between $2,298 and $8,332. Local listings for comparable cars ranged from $6,999 to $17,000. My car is paid off, which aligns with roughly 55% of Americans who own their cars debt-free.
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Assess Repair Estimates
Next, examine repair costs — what’s required now and what may be needed later.
For my Mini Cooper, replacing the brakes was estimated at about $1,200, and fixing the evaporator core for the A/C would be roughly $1,800. The shop recommended replacing the rear brakes though they weren’t urgent. Altogether, repairs totaled about $3,000.
So, repair or replace? Even with a range of values for the car versus the repair quote, the answer isn’t always obvious.
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Do the Math on a Loan
On average, Americans borrow $40,927 for a new vehicle and about $26,248 for a used one. The typical new car payment is $734 (or $586 for a lease), with terms approaching six years. Financial planners advise keeping monthly car payments under 10% of your take-home pay.
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Assess Your Vehicle’s Health
A full vehicle inspection from your mechanic can reveal the overall condition of the car and may be a worthwhile investment when deciding to repair or replace. If the front brakes and evaporator are the only questionable items and the Mini Cooper is otherwise solid, that favors repairing. If the shop finds numerous concerning issues, you’ll need to evaluate whether you can tolerate the unpredictability of an aging car and possibly take on a loan.
It’s also useful to consider expected longevity and your driving habits. Many cars last 200,000 miles or more, and Mini Coopers often reach or exceed that figure.
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If You Do Sell…
If you opt to replace the car, you can sell it privately or trade it in. Selling on your own usually yields more cash, which matters if you still owe a substantial balance. If selling privately, tidy the vehicle and repair any issues you can — be truthful about its condition, since misleading buyers can carry consequences.
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Repair or Replace: How I Made the Call
The decision to repair or replace hinges on several elements: whether you want to take on or extend payments, how much life remains if repaired, and your tolerance for the uncertainties that come with an aging car.
I ultimately chose to fix the Mini Cooper’s brakes because it was a safety necessity. I’m likely to repair the A/C as well, but I’ll seek a couple more quotes first.
One factor in my choice was how much the car is driven. The Mini sees about 7,000 miles a year, a bit more than half the average U.S. driver. Older cars often cost less to insure, which saves me a few hundred dollars annually.
Adding a car payment would strain my budget more than paying for repairs. While credit-card interest can be steep, some auto-repair chains offer financing cards with promotional rates that can help spread out the cost.
I estimate the Mini has another 50,000 to 100,000 miles in it — perhaps seven more years at my current driving rate. With any luck, it won’t need anything else for a year or two. Fingers crossed!
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Savinly contributor JoEllen Martin writes about lifestyle and culture. She previously owned a coffee shop in St. Petersburg, Florida, and has hosted an arts program on WMNF community radio for nearly 30 years.
