Financial formula - Keep repairing or time to replace your car?

Question

Does anyone have a good formula to run the numbers to make this decision?  When I use mine it seems like I should keep repairing a car forever because it never seems to be a better deal than replace it even with a used car.

I don't count scheduled maintenance because every car has those.  I add up unscheduled maintenance since the day of purchase and divide it by how many months it has been since I paid the car off.  I compare that number against the typical car loan payments if I were to buy a new car or a good quality used car.

What I used to pay as finance payments I put into a car account and pay repairs out of it.  The total never seems to go up to enough to get a replacement car but the total unscheduled repairs also never seem to average more than payments.

G6er · Accepted Answer

I work in km... so you may have to convert but generally the rule of thumb is that you can't drive much cheaper than 10 cents per km.
If you but 500 dollars into a repair, you'll want to be sure you can get about 5,000km out of that repair to make it worthwhile.
Once you get to a point where it doesn't seem likely that a $1,000 repair will net you 10,000km (or whatever the case may be) you need to consider if it's a worthwhile repair. Some discretion is used here but it's a "guiding formula"
I also look at value of car... If I have a car worth 1,000 I won't do any repair that is worth double the cars value.. but again that really comes from the fact that I likely won't get 20,000km out of that car before it needs more repairs.

Alex · Answer

It sounds like you're repairs are averaging out to equal your old monthly car loan payment.  It also sounds like you're not quite sure about the numbers ("seems").  I'd get sure about those numbers and what you expect future repairs to be - maybe you've recently paid a lot for repairs that will last a long time, check it out.

Good job continuing to make monthly loan payments to savings after the loan was paid off!  very smart!  If you're considering trading this one in, it's time to start preparing for that next car purchase.  I'd start by estimating what the new monthly cost will be (loan, insurance increase, gasoline increase, etc.) and put that amount in savings each month asap.  If you're not sure what that amount is, use the typical car loan payment amount you've been using to calculate thus far.

Jay P · Answer

Very easy formula...if the cost of the repair is higher than the value of the car, sell the car.

Financial formula - Keep repairing or time to replace your car?

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