How To Spend Your Vehicle Budget Wisely- Tip #1
A frequent conversation with many of our clients revolves around the theme of “how long should I keep my car” or “should I put money into this car” or “I’ve put too much money into this car”. Another slightly different but similar discussion revolves around the cost of the repairs and what the car is worth (in resale value).
While these are all valid questions to ask, many people jump to conclusions, often wrong, without considering some important points.
Recently I spoke with a client who drives a well-maintained older vehicle who expressed concerns about keeping his car. He felt that he had put too much money into it and it was getting too old. The vehicle still suited his needs, was well maintained, he liked it and while he thought that he should buy a new car, he really didn’t have the funds to do so.
I pulled out all of his repair and maintenance receipts from the past 6 years and they added up to $7600, taxes included. That may seem like a lot of money until you break it down into a monthly payment: only $106.00. Just $106 dollars!!! Where can you buy a car for $106 per month?? No-where! A bare bones econobox will cost at least twice that much in monthly payments (with taxes on top).
Now granted there are advantages to new vehicles: initially it’s exciting to get a new car and it certainly looks more impressive to the Joneses. Practically speaking new cars generally get better fuel economy than older cars and this could offset the cost of new car payments. You likely won’t experience any surprise visits to the auto service shop for several years.
On the disadvantage side the thrill of the new car wears off pretty quickly and you are left with years of payments. New cars also cost more to insure: an added cost.
Here’s something really important to consider: it matters little what your car is worth to sell. What is most important is, what is your total driving costs when everything is factored in: monthly payments, depreciation, fuel, insurance, repairs and maintenance. It’s not so much about how much you’ve put into the car because for the most part that’s just the cost of owning a car. When you buy a new car you are continuously putting money into depreciation: this is lost money and can often be thousands of dollars a year.
So before you get upset everytime your older car needs repairs take some time to look at the big picture. How much am I really spending on my older vehicle versus what I’d be paying in monthly payments on a new car? Does this vehicle still suit my needs? Is my car worth fixing? This is a great question and something that a good maintenance minded auto service shop that you trust can help you establish. Looking at all of those factors will give you confidence and peace of mind that you are spending your vehicle budget wisely.