Axios Detroit's Joe Guillen wrote about why he's keeping his 2010 Honda Accord. It has about 160,000 miles, he calls it the best car he's ever owned, and he says he doesn't want a new one.
A month or so before he wrote the piece, the car shut down while he was driving. His mechanic, Hoang Dinh of Dinh Auto Repair in Ferndale, replaced the alternator and the battery. It was ready the next day for "a little under $1,000." Earlier this year the Accord also got a timing belt and brakes. Nobody likes a surprise four-figure bill. But look at what you're comparing it with.
The payment you're not making
Edmunds puts the average new vehicle at $48,899. The average new-car loan runs about 6.9% for roughly 70 months, and one in five new-vehicle buyers is now financing at $1,000 a month or more. Edmunds also reports that the typical buyer who rolls an old loan into a new one finances nearly $56,000 at $932 a month.
Take the average payment, roughly $770 a month. A $1,000 repair is about a month and a third of that payment. A year of payments is more than $9,000. Even a year with two or three repairs can cost less than the loan you'd take to avoid them.
The cost nobody sees: depreciation
Guillen points out that a car you already own and have paid off avoids the depreciation that can run thousands of dollars a year. A new car loses the most value in its first few years, and you pay for that drop whether or not you ever sell.
A 16-year-old Honda has already taken its biggest hit. What it loses each year now is small.
The other costs of a new car
Sales tax on the purchase.
Higher insurance on a more valuable car.
Interest, which is real money at today's rates.
The risk of being underwater. Edmunds says about 31% of trade-ins have negative equity, averaging more than $7,000.
The mechanic's rule of thumb
The shop owner has worked in the business since 1982, and he's blunt: "Car is to me just transportation. A to B." His general rule is that if a repair doesn't far exceed what the car is worth, fixing it can still make sense.
When it stops being smart
Not every old car deserves a rescue. Walk away when:
Repairs start arriving every month rather than every year.
The problem is structural, such as rust, a transmission or major engine work, and the quote is well above what the car is worth.
Safety is in doubt, such as airbags, brakes you can't trust or steering problems.
The car has become unreliable enough that you're missing work or paying for rides.
What this could mean for car owners and used-car shoppers
Run the monthly comparison. Add up a year of repairs and compare it with a year of payments, insurance and tax on a replacement.
Find a mechanic before you need one. Guillen waited more than a decade after moving to find one he trusted. A good independent shop is the biggest asset of an older car.
Keep a repair fund. Setting aside what a payment would have been, say $200 to $300 a month, turns a surprise bill into a planned expense.
Do the maintenance on time. Timing belts, brakes, fluids and batteries cost less than the breakdowns they prevent.
Don't roll old debt into a new loan. It is the fastest way to end up owing more than the car is worth.
Bottom line
A paid-off car with a reliable mechanic is one of the best deals in personal finance, and it's boring. The headline number is the payment you don't have. Keep the old Honda as long as the repairs cost less than the replacement, and be honest with yourself about the day that stops being true.