By Eric Peters, Automotive Columnist
Machines fail. Cars are machines. Eventually, they fail — or put more precisely, their systems eventually begin to wear out. Stuff starts to go wrong. Then, it starts to go wrong more often. The car is no longer reliable. Or it requires frequent fiddling with — which gets expensive if you have to pay someone else to do the fiddling and is a hassle even if you do the fiddling yourself. You fix one thing one week, then next week or next month something else goes south.
Meanwhile, despite all the money you’re putting into the car, it’s not worth more.
This happens to every car, inevitably. Some sooner, some later. But no matter the make or model — no matter how well-built or reliable — someday, even the best-made (and most fastidiously maintained) car is going to reach this point — the point of diminishing returns. The point, after which, you are throwing good money after bad by paying for repairs and upkeep.
The hard part is knowing when you’ve reached that point — and (ideally) parting ways with your old car before it becomes an unreliable money pit. And before you’ve already sunk a bunch of money into it that you’ll probably never get back when you sell it or trade it in.
One very good rule of thumb is what you might call the Equity Rule.
You have “x” dollars of value in the car (as measured by current used car value guides). You should always know — approximately — the current fair market value of your vehicle. This is the first number of the equation. Jot it down on a piece of paper (or whatever) and update it once year.
Because without that number, it is impossible to intelligently answer the Big Question: Is it worth fixing?
The next number(s) you’ll want to have on hand (or in your head) is the approximate cost of major repairs to that vehicle. For example, if the transmission fails, or the AC stops working, how much will it cost to rebuild/replace/repair that component/system for your particular make/model vehicle?
A good way to do this is to just call a few repair shops and ask for an estimate. If you have, say, a 2002 Honda Civic, call around (including dealers) and ask what would be a ballpark estimate to put a new (or rebuilt) unit in it. You won’t get an exact number, of course. But you will get a very good idea.
Also, root around a little online to find out what problems (if any) your particular make/model/year vehicle may be prone to — and when?
Check owner Forums, for example — or just type your make/model/year vehicle into your web browser along with “complaints” or “problems” and see what comes up.
Forewarned truly is forearmed.
Many people have no idea — until it’s too late — just how expensive it can be to fix/replace certain items. A new transmission, for example, can easily cost $2,000 or more, depending on the vehicle — just for the transmission. Not including the labor to install it. Putting in a new AC compressor (or electronic control unit, if it’s climate controlled AC) can be similarly wallet-draining.
And many people have no clue that the vehicle they’re driving is prone to certain very expensive failures — until the expensive failure has happened.
And that’s the trap.
People don’t know what their vehicle’s worth — and then they get blindsided by huge repair bills they failed to anticipate.
But if you know ahead of time that your car’s worth, say, $3,500 and that putting a new transmission into the thing will cost you $2,000 — you probably won’t decide to put a new transmission into it. Even better, you’ll know it’s time to sell/trade it before the transmission craps out on you — which, because you did some research, you know is a distinct possibility after about 120,000 miles or so. So you do the smart thing — and dump it before it gets to that point; while it’s still in good running order without having to spend 40 percent of what it’s worth to get it back into good running order.
That’s the Big Ticket stuff, of course.
You should also keep track of incidentals — the “little things” that you’ve been spending money on. A small notebook kept in the glovebox is ideal for this. Now instead of guessing how much you’ve spent on minor repairs and so on over the past year, you can know how much you’ve spent. Now, divide by 12 and you’ve got a handle on how much it’s costing you per month to keep the old beast going. Weigh that against what the car’s total value is and stack all that up against what it would cost you, monthly payment-wise (or lump sum-wise) to replace the old beast with a new car — or at least, something newer.
Do that, and you’ll likely never be the one left holding the bag.