If you’re considering buying a new car, you may also be wondering if it makes more sense to invest in keeping your current vehicle up to date. After all, buying a car is a significant investment. So, should you take the plunge and sell, or is it better to invest money in making repairs to your existing ride? The answer comes down to reliability, safety, practicality, and—of course—your budget.
Does Your Current Car Cost Too Much?
Before you decide it’s time to buy a new car, take some time to crunch the numbers. A $1,000 repair bill may seem like a lot, but if it’s a one-time repair that will keep your car running for a couple of years, then it’s a smart investment. In these cases, for example if your timing belt needs to be replaced, it’s better to keep your car.
On the other hand, if you’re spending the equivalent of a few months’ car payments on repairs every year, then it’s likely time to buy a new car. In these situations, you’re better off investing in more reliable transportation instead of gambling on your current car’s reliability.
Gas mileage is usually not a great reason to replace a car. You won't save much money except under certain circumstances, like if you move from a gas-guzzling pickup truck that gets only 15 mpg to a hyper-efficient hybrid rated for 50 mpg. The EPA has a great comparison tool for viewing annual fuel costs, and we have even more advice on what to consider when buying a car for commuting.
Is Your Current Car Safe?
Does your state require safety inspections? Could your car pass inspection without a substantial investment? If not, it’s time to stop driving it. Even if your state doesn’t require safety inspections, ask your mechanic to conduct one. If your car can’t keep you safe on the road, it’s time for a new car.
Does your current car lack modern safety features? As vehicles on the road grow bigger and heavier, seatbelts and a couple of airbags are no longer enough to qualify your car as safe. Newer vehicles have mandated reversing cameras and tire-pressure monitoring systems (TPMS), and many offer good headlights, side-curtain airbags, blind-spot monitors, and automatic emergency braking systems. These systems have saved lives—because the safest accident is the one that never happens.
The National Highway Traffic Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS) have advanced their testing methods, so newer cars are subjected to more stringent crash tests than the vehicles of yesteryear.
Does Your Current Car Suit Your Needs?
Does your current car have enough space? A 2-door coupe is loads of fun when you’re single. But once a baby arrives, you’ll appreciate a car with four doors and more cargo space.
Does your current car work well for your commute? Are you driving 30 miles each way in the family’s 3-row SUV, even though all three kids have grown and left the nest? If so, you likely own too much car.
On the other hand, you may not own the right-size car. Need to tow with your vehicle? It’s better for your engine and transmission to have too much towing and hauling capacity than not enough. Don’t max out your car’s capacity: It’s easier and safer to use a vehicle with a 3,000-pound rating to tow an 1,800-pound trailer than it is to use a vehicle rated for 2,000 pounds.
Don’t skimp when it comes to comfort, either. Experiencing back pain after driving short distances? Your seats could be worn out. A lot of newer cars have heated, ventilated, and even massaging seats, which can be a revelation for those who suffer from chronic back pain.
Stay Within Your Budget
Car ownership combines passion with practicality. Passion is having the latest features, like wireless phone charging, a powerful engine, and an upgraded interior with luxurious leather seats. Practicality is paying for it all.
Before considering a new car, see how much you owe on your current vehicle, and use our Instant Market Value tool to determine what your car is currently worth. After paying off your auto loan, you may not have enough money left over in your savings (or checking) account for a down payment on your new car. If you don’t need the new car right away, take a few months to set aside some cash for a down payment. Your car won’t depreciate much, and you will be more financially ready for your next purchase.
Even if you have enough for a down payment, avoid spending too much on a new car. Consider your motivation for buying it. Try to keep your monthly payments between 10 and 20% of your take-home pay. Don’t forget to estimate other expenses like maintenance, gas, and insurance when calculating your total monthly cost of ownership.
If you have bad credit, you will want to take some time to rebuild it. In a year (maybe two), you can significantly raise your credit score to increase the likelihood of qualifying for a lower interest rate on your next auto loan. That lower rate can substantially reduce your monthly payments and shorten the time it will take you to pay off your loan.
Before you go to the dealership, make sure you know how to negotiate a new car’s price. It’s a process that involves researching the invoice price (when buying new, rather than used), understanding the car’s market value, knowing what items to haggle over individually, and shopping at the right time.
The Bottom Line
A new (or new-to-you) car will initially cost more than keeping your existing vehicle, but it can save you the frustration of an unreliable ride, not to mention the cost of repairs. A new car will usually be safer and better serve your lifestyle with more modern technology and better safety features.
If these considerations aren’t an issue, then you’re likely better off keeping your existing car and tucking any extra money into your savings account. But if you need to address any of those issues—and if there’s room in your budget—it’s likely time to buy a new car.
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