If you’ve ever owned a car you’ve likely considered upgrading your wheels to something brand new. Perhaps “old reliable” is losing its right to the nickname. Maybe your family is about to grow and your sporty little number isn’t ideal for kids, shopping and the occasional road trip. We make those decisions out of necessity. What if your car is still in good nick? Is it worth turfing your ride for something new? Or can you repair your current car for less?
Breaking down the costs
A shiny new car is a big lure to step up to something factory fresh – though sometimes it’s more trouble than its worth. With every big asset purchase you make, you need to consider initial costs and long term costs.
Initial costs are the money you’re laying out up front. This means the purchase price and getting it on the road. Not many of us can afford a new car out of pocket, so you may trade-in your vehicle to offset the price of your new car, or sell it via private sale. If your car isn’t in the best condition, you may have to let go of a generous deposit when you sell (if you can) and buy your new car. That means applying for finance.
Long-term costs are ongoing costs around maintaining, repairing and insuring the car. You’ll also have to factor in registration and/or compulsory third party insurance (CTP) per year so your new car is street legal. Check out types of car insurance here.
You should also figure out how much the car costs to operate – that’s weekly fuel costs. Add these all up for a rough picture of how much you’ll be paying each week, month, or year for a new car. And check out some car reviews before you buy.
What the old car might cost
To make a sound decision, you figure out how much your old car will cost to run, maintain and repair. Sometimes older cars need repairs as components reach the end of their life cycle. Even if you’ve maintained your car at every scheduled service, parts still need mandatory replacement. For example, even five-year-old vehicles may need fan belt replacement – this easily costs four figures.
With the help of a reliable mechanic (or perhaps two for a second opinion), you can get a list of what needs urgent repair, and what might need complete replacement in the near future. This is also helpful when you’re preparing the car for sale, as repairs add value for buyers.
Then you have to find out how much the car costs in fuel each week and ongoing maintenance – perhaps your car requires more services, more often. If your car is still under finance, add in your regular repayments – or if it’s coming to the end of the loan, how much it would cost to pay it off outright (including any early exit fees.)
Making a decision – doing the sums
It really comes down to the numbers.
If you can finance a new car for about the same amount as you’re paying for the current one – and it works out cheaper than getting repairs done, the answer is plain. However, to err on the side of caution is always a good thing, especially if you have a young family. If you can wring a few more years out of a car that’s safe and reliable – do it. If not, a new car may give you greater peace of mind.
About the Author:
Bill Tsouvalas is founder and CEO at Savvy and has been working in the vehicle & asset finance business for over 9 years. He also writes articles on vehicle finance, mortgage and insurance topics for the Australian market.