There are five questions you should consider before buying a used car or keeping the used car you currently have. Some have to do with personal finances while the others focus on the used car itself.
This article was prompted by this email from a reader: "We own a 2000 Bonneville SSEi in "Good" shape with 149,000 miles. The book is around $3,000. It was in a front end wreck 9 years ago.
"It's a unique car -- looks cool, fun to drive, comfortable. Not many were made. "We've maintained it well. But due to its age, there have been several repairs done in the last 3 years (motor mounts, tie rods, front bearings, struts & coils, fuel line, compressor, actuators on vents and power windows, etc.). Since it's a full-size luxury sedan, repairs are more expensive. And, it gets lousy gas mileage.
"We're now passing it on to our 18 year-old son, who will be responsible for 1/2 of the repairs and many of the other costs involved in owning a car. He really likes the car. And, it has a good safety rating because of it's massive size and weight, so I'm happy with him driving it.
"How can I calculate if it's worth putting even more money into the repairs (not knowing what more serious repairs may lie ahead); or, if it's more economical to cut my losses now and start over purchasing a slightly used (two-year-old) vehicle? Is there an equation somewhere to help me calculate this?"
Predict the Car's Future
CarMD.com has a tool that will help you predict a used car's future when it comes to mechanical needs. CarMD's premiere product is the CarMD Vehicle Health System, which enables drivers to identify and diagnose check engine repairs, safety issues and problems that negatively impact a car's fuel economy. The company has built the largest, most current database of diagnostic trouble codes, expert fixes and repair costs, which it uses to compile its CarMD Vehicle Health Index, a leading automotive repair resource.
Are You Discplined?
If you are, there are two things you can do. The first is to put a little money aside each month either towards repairs or a replacement used car. The second is to invest now in preventive maintenance if that's something you haven't done previously. Simple oil changes, even if they haven't been done regularly in the past, are going to make your used car run a lot longer. Spend $100 every couple months (because there are other services that can be performed at oil change shops) and you could get a few more years enjoyment from your used car.
Crunch the Numbers
Do you have the room in your budget for a replacement used car? The money is going to have to come from somewhere and how expensive is that money going to be? For example, radio consumer advice guru Clark Howard says, "You can't borrow money for your retirement." Will you have to short change your retirement savings in order to finance a used car? That's not a good idea. I'm not going to devote a lot of space to financial advice because About.com has an expert for that. His name is Joshua Kennon and he writes about Investing for Beginners that might be a good place to start.
Want vs. Need
It's a question posed to children all of the time when they proclaim, "Daddy I need an iPod Touch or I'll die." [OK, maybe just my daughter proclaims that.] Have a heart-to-heart with your brain. Are you ready to trade in your used car just because you want a replacement used car or do you really need one because the doors are falling off and it's belching black smoke?
Live with cosmetic irregularities. Too often we get caught up in people's perceptions of us. Are you the type that sees your used car as transportation? Then, you can probably live with the dings and dents.
Cosmetic vs. Mechanical
This might fall in the same category as above but you also need to take an inventory of your used car's cosmetic flaws as well as mechanical flaws. Both are going to affect your used car's value when it comes time to either trade it in or sell it on the open market. A cosmetic problem that is getting worse (i.e. rust) is going to make the value decline as are unfixed mechanic problems (i.e. a list too long to begin). [But there are things you can to improve a used car's value.]
However, if you're the type that plans to run a used car into the ground, cosmetic concerns really shouldn't be an issue. Your ego might take a battering but you'll be saving money.