How Long Should You Keep Your Car?
Some quick math: The average modern car lasts about 200,000 miles, while cars with electric engines are expected to last for 300,000 miles. Experts have concluded that about $30,000 is saved by driving a car from the first mile to the 200,000th. The average mileage put on vehicles each year can be anywhere between 12,000 to 15,000 miles.
All these numbers indicate that the average car has an average lifespan of 12 to 16 years. But they don't take into account that some brands and models are naturally more resistant to the wear that comes with time — especially for people who drive their vehicles more aggressively and roughly, as they put more wear-and-tear on essential car parts.
Should I Fix My Car or Scrap It?
Repairing your car is almost always cheaper than buying a new car. While exceptions to this rule do exist, even the most expensive repairs for aging cars are usually cheaper than a brand-new vehicle.
Most expenses for your older car will likely come from maintenance costs and the costs of replacing certain parts. However, if you're considering buying a car in finance, it's important to note that purchasing a newer car means your new investment depreciates by anywhere between 20%–30% after just the first year of use. On top of that, insurance and registration fees are considerably higher for newer cars.
However, while maintaining and repairing your current car in these ways is cheaper, other things keep it from being the best choice. For example, it may not be under warranty anymore. Newer vehicles that are still under warranty offer double security, preventing trips to the mechanic until your car has had time for problems to appear.
The question, then, may not simply be whether you can afford to buy a new car. The question might be whether you can afford the new car and if the pros of purchasing one will outweigh the upfront costs that will arise down the road.
Consistent maintenance fees for your current car, or insurance and registration fees for a new one?
Does Car Repair Cost More Than It’s Worth?
If a car will cost more to repair than its open market cash value and when the salvage value exceeds its cash value, it's considered totaled.
Insurance appraisers will estimate the cost of various factors, including replacement parts, labor, and salvage value, to determine this. If the value is less, then it's not a financially sound decision to repair it. Essentially, you're pouring money into it and not getting any returns or value from your dollar.
How Often Should You Get a New Car?
There are two options for determining how often you should get a new car. Do you want to get every dollar of value out of your car, or would you rather make use of its value after three to four years and trade in the depreciated vehicle for a newer one? The first year of depreciation is 20%–30%, while every year after is 15%–18%. Trading in your car after three years for a newer model means that about half of its value will be retained and a newer vehicle is yours for a practical discount.
For most people, cars are necessary. But when they start to need repairs, it's key to know whether it's time to repair or replace them. To learn more about making the best financial decision when faced with this question, get in touch with us at Oklahoma Central Credit Union today.