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For car owners who haven’t been in the market for years, the decision to replace a vehicle isn’t easy.
New vehicles now cost roughly $15,000 more than they did a decade ago, while the average monthly payment on a financed new car has climbed by about $250 to $773, according to Edmunds data. At the same time, cars are lasting longer than ever, giving drivers all the more reason to avoid shopping for a replacement.
Inevitably, though, even the most reliable cars break down, which poses a potentially expensive question for car owners: When does it make sense to keep and maintain an older vehicle, and when is it time to move on?
Experts tell CNBC Make It there isn’t a single formula for deciding when to replace a vehicle. Instead, they recommend working through a few key steps.
1. Start with the 50% rule
One common rule of thumb is that a repair bill approaching half the vehicle’s value is worth a closer look, according to the American Automobile Association.
For example, if a car valued at $8,000, based on estimates from tools such as Kelley Blue Book or Edmunds, needs a $4,000 repair, it may be time to evaluate whether keeping it still makes financial sense.
“It’s a good starting point,” says Ivan Drury, director of insights at Edmunds.
But other experts caution against treating the benchmark as an automatic trigger to replace a vehicle. In some cases, a major repair can buy years of additional life from an otherwise reliable car.
“That one repair doesn’t necessarily have to be the end of the car,” says Alan Gelfand, a mechanic and owner of German Car Depot in Hollywood, Florida.
Still, a major repair bill can be a signal to step back and evaluate your options.
When that happens, “it’s time to start doing some math, leave emotions out of it and hopefully make the smartest financial decision for you,” Gelfand says
2. Ask whether you still trust your car
The next step is deciding whether the repair is an isolated problem or part of a larger pattern.
“If it’s a transmission, or an AC compressor, and nothing else is going wrong with your vehicle, it’d be pretty safe for me to say keep driving,” says Drury.
But if it’s not an isolated event and expensive repairs keep piling up, that could be a sign that the vehicle is becoming more of a problem than it’s worth.
“One major repair is OK if it fixes the problem and you can rely on the car again,” Gelfand says. “But if you are spending $2,000 here, $1,500 there, and you don’t even trust the car anymore, that’s when it’s time to start thinking about replacing it.”
For Drury, the decision isn’t just about repair costs. It also comes down to whether you still feel confident relying on the vehicle: “You have to think of car ownership more like a personal relationship. It’s going to involve many different things, with the number one being trust.”
Mileage is often treated as a benchmark for when it’s time to move on from a vehicle, but Drury says it can be misleading. “People can stop trusting their car at 45,000 miles or 245,000,” he says.
3. Do the math
Once you’ve decided it’s time to consider a replacement, the next step is comparing the cost of keeping your current vehicle with the cost of moving on.
“If you’re still making payments, you’re not comparing payment to payment,” says Jeff Judge, a certified financial planner with Chesapeake Financial Planners. “You’re comparing total cost to total cost.”
Online auto loan calculators can help estimate the financing cost of a replacement vehicle, but Judge says buyers should compare total monthly ownership costs, including expected repairs and insurance premiums, rather than focusing on the payment alone.
Consumers should also account for any remaining loan balance or trade-in equity, both of which can affect the cost of replacing the vehicle, says Judge.
For drivers with a paid-off vehicle, the calculation is simpler. Judge recommends adding up the past year’s repair bills and factoring in any maintenance or repairs the vehicle is likely to need to estimate a monthly cost of ownership, then comparing that with the cost of a replacement vehicle.
“A paid-off car has one job: cost you less than the alternative,” he says. “The day it stops doing that job, it’s done.”
One challenge is that no one knows exactly what repairs a vehicle will need in the future.
“Part of this is always an educated estimate,” Judge says.
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