It's the situation that everyone dreads. One minute you're cruising along without a care in the world, the next your car is stalling and sputtering. Then you're on the phone to roadside assist (again!) before, inevitably, you find yourself shelling out even more cash (again!) just to get your car back on the road. If you find yourself spending more and more time waiting for tow-trucks, it can be tempting to throw in the towel and spring for a new ride altogether. But is that the best choice? Well, that's a complicated question that depends on a whole host of factors. Here are just a few things to consider before you decide to consign your old faithful to the great junkyard in the sky.
Minimise emotional frustration
If your car constantly breaks down, it can become as much of a psychological burden as a mechanical and financial one. Which is to say that it's a pain. You've got to get your car to the mechanic, make alternative arrangements while it's being repaired, then find time to come and collect it. It sucks, and that's not even factoring in the expense.
Once you've rinsed and repeated this process a few times, the idea of a new car can seem as appealing as an oasis in the desert. But, like many of life's big decisions, it pays to try and divorce your emotions from the situation.
Do the math
Constantly repairing a car can be expensive - but a new one isn't exactly cheap, either. When you're weighing up your options it's worth sitting down and crunching the numbers.
First, consider your fixed costs and then add the amount that you've invested in repairs up until this point. That will give you a rough framework from which you can work out how much you're coughing up per month for your ride.
Remember, even if you factor in future repairs, this monthly cost is likely to be lower than the repayments on a new car. On top of this, you're still going to have to pay ongoing costs to run a new vehicle - including insurance, registration, petrol, and tolls. There's no point springing for a new ride if you don't budget enough to be able to keep it on the road.
Also, it's worth noting that maintenance costs are inevitable (although the older the car, the more maintenance it's likely to require). Electronics fail, parts wear out, tyres need to be replaced. If you're financially astute (and if you're reading this, you probably are) you can budget for those repairs, so you're not caught short when things (inevitably) go wrong.
One way you can minimise some of these costs is to learn basic car maintenance that you would otherwise pay for. If you're a disciplined student at the University of YouTube, you can feasibly save hundreds (if not thousands) of dollars by tackling minor jobs yourself. Of course, any major repairs and regular services should always be carried out by a licensed mechanic. You can't put a price on safety.
So, you want to buy a new car
Maybe you've run the math, given it some serious thought, and decided that you'd prefer to take the plunge and commit to a new car. Congratulations! Now, how can you make this work for you financially?
Perhaps one of the biggest decisions you'll need to make is whether you want a brand-new new car or a used car that's new to you. A vehicle from a dealer can certainly be appealing, as you'll have the peace of mind that comes with a new product - backed up with a manufacturer warranty if you're unlucky enough that something does go pear-shaped. Having said that, a new car comes with its own set of drawbacks - and chief among them is depreciation. As The Age reported in October 2018, the average new car's trade-in value drops 33 per cent after one year on the road, and a staggering 52 per cent after three years.
Buying used means that you can potentially take advantage of this depreciation and pick up a new-ish car for a good price, while still benefiting from a reliable ride and modern safety features. If you're leaning towards a used car, make sure that you don't make any of the common mistakes that we've previously discussed.
Finally, consider whether your current car has any trade-in value (even in a run-down state). If you sell it privately, are you going to be able to recoup any of the costs that you will be outlaying on a new car?
A final word
Ultimately, you don't want a sudden breakdown to force you into a financial position that you're unprepared for. A modern car can last well over a decade with proper maintenance, with Car Advice finding that the average vehicle in Australia is 10.1 years old. While unexpected mechanical problems can (and do) happen - with a little foresight and planning you can stash an emergency fund that might just save your skin (and wallet).