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Car Trouble? Here’s How to Decide if You Should Repair or Replace Your Car

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Updated 4 Hours Ago

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Your car’s check engine light is making a more consistent appearance. The air conditioning no longer works and summer is coming. Plus, the car is not in its youth by any means. So, should you repair or replace your car?

Here’s how to make the call.

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Car Prices and Insurance Costs

It’s not an easy choice to make. Car prices, both new and used, have skyrocketed in the last few years. Car payments have also gone up. That’s partially because of higher interest rates and partially because the average car price has risen.

New car prices average $48,641, according to CarEdge. Auto manufacturers have focused more on building SUVs and higher-value cars over the past decade, so there are fewer starter cars (new cars costing under $23,000) these days. Though you can still find some.

Consumer Report writes that the average price of a used car hovers around $26,134, with the average interest rate on a used car loan just over 12%.

Just to rub salt in the financial wound, vehicle insurance prices have also increased — the average cost of a full-coverage policy is $212 a month.

Despite the higher prices, higher interest rates and higher insurance rates, new car sales haven’t lost momentum. At the same time, the average age of light trucks and cars on the U.S. roads rose to 12.5 years old in 2023. The older vehicles keep repair shops busy and raise the demand for, and prices of, older parts.

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Save Money for When You Need to Repair or Replace Your Car

Let’s face it: Cars don’t last forever. So before you have to make the decision to repair or replace your car, it’s a good idea to pad your savings… just in case. Here’s a list of some of our favorite ways to save.

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How to Decide Whether To Repair or Replace Your Car

Figuring out if it is time to head to the repair shop or auto dealer depends on several things. We will look at each one a little more in depth.

What To Consider When You’re Considering Whether To Repair or Replace Your Car

Here’s what to consider when deciding whether to repair or replace your car:

Money still owed on the vehicle vs. a free and clear title
Vehicle value vs. estimated costs of repair
Major repairs already done vs. looming repairs
Your current financial status
How much life the vehicle has left

Assess Your Car’s Value

Figuring out the range of your car’s value isn’t tricky. There are several online calculators you can use, like Kelley Blue Book, Carfax and Car and Driver. This is also important to consider: Do you still owe money on it? How much is your loan, and is it worth refinancing?

Let’s take a look at my car, for example. Online calculators valued my car between $2,298 and $8,332. Local similar cars for sale were priced from $6,999 to $17,000. The car is paid off, which is true for about 55% of Americans who own their cars without debt.

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Assess Repair Estimates

Next, it’s time to look at repair costs — what’s needed now and what will be needed down the road.

Fixing the brakes on my Mini Cooper would cost around $1,200, and replacing the evaporator core to fix the air conditioning would be about $1,800. The mechanics suggested replacing the back brakes, but there were no immediate issues. The total was $3,000 in car repairs.

So, repair or replace? It isn’t really clear cut, even with the range of value for the car versus the estimated cost of repairs.

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Do the Math on a Loan

Americans borrow an average of $40,927 for new vehicles, and they borrow around $26,248 for used vehicles. The average new car payment is $734, or $586 for a leased car, and the terms last for a little less than six years. Financial experts state that a monthly car loan payment shouldn’t exceed 10% of your monthly income.

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Assess Your Vehicle’s Health

Your mechanic can look at the overall health of your car by doing a complete vehicle inspection. This might be a good investment to help you decide whether you should repair or replace it. If the front brakes and evaporator core are the only iffy issues and the Mini Cooper is otherwise in good shape, that tips the balance toward a repair. If a mechanic finds a list of things that look questionable, then it’s time to look at your tolerance for a car payment.

It’s also good to look at how long a car will likely last — and how much it gets driven. Cars generally last for 200,000 miles or more, and Mini Coopers last at least that long — and maybe a little longer.

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If You Do Sell…

If you decide that it is time to replace your car, you can either sell or trade it in. Selling your car yourself gets you more money, which matters if you still owe a lot on it. If you decide to sell it privately, you will need to spruce the car up and fix some of the issues it has (if it has any). Be honest, because there are penalties for misleading a buyer.

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Repair or Replace: How I Made the Call

Deciding whether you want to repair or replace your car can be determined by several things. This includes the cost or benefit of taking on or extending car payments, how much life is left in your car if repaired and what your tolerance is for the uncertainties of an aging vehicle.

Ultimately, I decided to fix the Mini Cooper’s brakes because it was a safety issue. I’ll probably get the air conditioning fixed, but I’ll need to get a couple more estimates.

A factor going into my decision was how much my car gets driven. Currently, the Mini gets driven about 7,000 miles a year, slightly more than half the average American car. Older cars also have cheaper insurance costs, which saves me a few hundred dollars.

Taking on a car payment would significantly impact my budget, whereas repairing the car could be absorbed more easily. While credit card interest can be higher than loan interest, some automobile repair chains offer their own credit cards with promotional deals.

My Mini has 50,000 to 100,000 miles still to go, or at least seven more years of tooling around in it with my current average mileage. Hopefully, it won’t need any additional repairs for a year or two. Fingers crossed!