Keep your car or buy a new one?

Lets divide the car buying world into two group: those who keep a car until it dies and those who buy a new car every few years. Bottom line, there is no cheaper way than to properly maintain your vehicle and keep it over 200,000 miles. New cars smell nice, but usually don’t make sense financially.

Several independent studies have shown the financial benefits of keeping your car longer. The following table from Runzheimer International, a management consulting firm, compares keeping a 4 year old car another 4 years versus buying a new one, showing a savings of $10,894.00!

This table from consumer reports compares keeping a Honda Civic for 15 Years versus a new Honda Civic every 5 years. Saving of $20,500!

So if those repair bills seen to be adding up, do the math. Does the cost of repairs exceed the cost of a new car? A typical new car is $21,000, about $350.00 a month for 5 years after 20% down. A major engine repair might run $1,500, a huge outlay in one chunk, but far less than the $4,200 a year you would spend on new-car payment every month. In any case, anyone with a car older than three years old should be a saving of $100.00 a month for repairs and maintenance. With a little luck, you’ll never use the most of it and you’ll have a tidy sum to spend on your next car.