The pandemic affected a lot of things, including the automotive industry. The vehicle market for used cars and trucks saw a huge shortage that was immediately followed by new production delays, which means that the market value of pre-owned cars is quite high right now. For those who have a car that is older and in need of repair, that could be a good indicator that it’s time to trade up. You can get more for your trade and find plenty of financing options since dealers are eager to get their hands on used vehicle inventory.
But, how can you decide whether it’s time to trade your vehicle or fix it? Is there a certain price threshold or should you automatically skip fixing major issues like transmission troubles or serious engine work? These are all things that you’ll have to consider for yourself. Ultimately, the better condition your vehicle is in, the more you can get for your trade. However, because of the dry spell in the used market, many dealerships are taking just about anything, no matter what kind of repairs are needed, because they just need to bulk up their inventory.
Before we help you consider the case for trading versus fixing, let’s take a look at the state of the industry and some statistics that are impacting this decision for car owners everywhere.
In 2020, despite the pandemic slowing life down for a lot of people, Americans bought more than 14.4 million cars. Of course, that was still a decrease of almost 15% compared to 2019. And, there were a whopping 77.6 million vehicles produced around the world in 2020.
The US Department of Treasury spent around $82 billion to help bail out the auto industry, second only to banking institutions that got $250 billion in total funds. The response was that sales in 2021 shot back up to just about 700,000 shy of what the sales were in 2019 (16.3 million).
For 2022, the industry is looking bright. There’s still a huge shortage of used inventory, of course, which is why so many dealers are trying to talk people into trades. The types of specials that dealers are offering for trades right now are unheard of—and in some cases, impossible to pass up. Here are some more numbers to consider.
So, the auto industry seems to be on the up and up, but you’re still going to see a big push for trade-ins if you take your car to the dealer for service. Dealers are sending people letters advising they can reduce their payments, pay off existing loans, and do other “favors” for people who come in and give them another used vehicle to sell. Of course, there are often limits on the purchases that you can make or the condition of the vehicles that apply for this special offer.
Thus, you’ll want to take the time to do your homework before you decide. To assist with that, here’s what you should know about repairs versus replacement.
Most automotive experts will tell you that you’ll almost always come out on top when it comes to money if you choose a repair over replacement. However, depending on the repairs that need to be done and the condition of the vehicle, it might be time to trade. The easiest way to figure this out starts at scaling the cost and the type of repair based on the value of the car.
For example, if you’ve got a $2,000 repair but your car is still worth $17,000, it’s worth fixing. If, however, your car needs $7,500 in work and it’s only worth about $10,000 at the present time, you might want to consider trading up. And of course, if the cost of the repair is bigger than the cost of replacement, that’s pretty much a no-brainer.
Of course, there are people who, no matter the circumstances, might not be in a position to purchase a new (to them) vehicle. Even if their old car is on its last legs, they may still need an independent shop to fix those legs as many times as is possible before they throw in the towel.
If it’s a one-off repair that doesn’t impact other systems or that won’t lead to further repairs down the road, fix it. If you are just fixing the first of a downward spiral of car troubles, consider trading off. After all, with the way the industry is right now, dealers are giving good money for used cars, even when they’re not in great shape.
Ultimately, this is a choice that you’ll have to make. If you work with a reputable independent shop, they will be the best source of insight. They can help you understand exactly what’s wrong, what needs to be repaired, and how much it will cost. They can also explore things like aftermarket parts, used parts, and other ways to save money on otherwise costly repairs. And they’ll do it all happily to earn your loyalty—what more could you ask for?
However, your repaired vehicle might end up needing more repairs, so that will have to be considered, as well.
If you’ve reached the point where it’s no longer worth pouring money into your vehicle, you should consider buying something else. You don’t have to go out and get a new car, or even a used car, with a high price tag. You can buy used and save the difference. For a few thousand bucks, you can get a decent vehicle these days.
If you have major repairs that need to be done, a trade might be in order. After all, investing another $5,000 in your vehicle that’s only worth $12,000 is just going to eat away at the remaining value. Instead, you could spend that money on a down payment for something that doesn’t need a lot of repairs.
Of course, the caveat here is that you’re making a long-term financial commitment by getting a new car loan instead of just repairing your car. If it turns out that this is a worthwhile investment, then go for it. Perhaps you’re being made an offer that you can’t refuse because they want your vehicle so badly. Even that’s enough to choose to upgrade if the price is right.
So, what’s the ideal decision? That’s going to be different for everyone. For you to determine whether you’ll stick with repairs or go for a trade, you’ll have to factor in all the things that matter to you. Start with things we discussed above like how much the repair will cost, how much value it will add to the vehicle, and whether trading in and upgrading might be a more affordable option.
Of course, money is only part of the equation here. The math will only show you so much when you’re trying to decide how to proceed. You’ll also have to consider things like the frequency of the repairs, what is owed on the vehicle, and its overall value, just to mention a few things. It’s a numbers game, but it’s also about considering value and long-term investments. Vehicles aren’t cheap. You don’t want to be replacing them all the time if that’s not necessary.
If you decide to make repairs, shop around and get a diagnosis from a trusted shop, as well as a second opinion. Then, ask friends and family what shops they use and consider working with them. You can even call and ask about discounts and specials.
You might also consider doing some of the repairs yourself if you’re capable. This can cut down on the costs since the majority of what you pay a shop is the labor fee. Then, there’s the issue of repairs or upgrades that might be able to wait a while. Obviously, if you need new tires or brakes, you can’t put that off. However, if your automatic windows go out, you’ll still be able to use the car until you can afford to repair the issue.
Make a budget for each option. Consider the lowest possible repair price, the highest price, and what it would cost to upgrade in terms of a monthly payment. Ask around to see what kind of trade value you can get for your car, even without repairs performed, so that you know all of your options before you make a move. There are tons of apps and tools out there today that can help you make a budget, so feel free to check them out in your quest to decide how to proceed with your car repair needs.
If you have decided it’s time to upgrade, your next decision will be whether you are going to buy a new vehicle or a used model, or if you are going to lease a car from a dealership for the short term. Each has its own perks, but buying new is always a bit of a rough choice—new vehicles lose about 60% of their value in just five years. You even lose a decent amount of value as soon as you drive the car off the lot.
If you don’t want to be hit with that loss, stick to buying used cars. And, if you really like the idea of driving a newer car but don’t want a payment that rivals your mortgage, consider leasing. This solves the issue of repairs, too, because most dealerships will include repairs and maintenance in their lease contracts since they’re eventually taking the vehicles back.
Used vehicles are generally the best option, but if a dealer is giving you a trade special to buy new, you may have to compromise. See if they’ll offer anything for a used trade. After all, right now buyers have the upper hand because dealerships are still trying to rebuild their used inventory and restore their new vehicle purchases to pre-pandemic numbers.
You’re the only one who can ultimately decide on what to do with your vehicle when it needs repair. Considering all of the statistics and insight here, it should be a little easier for you to make a decision that fits your financial situation and gives you a reliable vehicle, as well. Some people like to drive newer cars, and that’s fine if you do, so long as you can afford the expense.
If, however, you’re on a tight budget and a repair could give you many more years out of your vehicle, it might be best to stick with repairs and ride it out as long as you can. Especially for those who have their vehicles paid off, getting a new car usually means taking on a new loan, and car payments aren’t cheap.
Choose what works for you, and work with dealers and repair shops that offer honest, reliable service to help you find the right solution.
Resourceshttps://www.nerdwallet.com/article/loans/auto-loans/fix-sell-car#:~:text=If%20you%20decide%20to%20break,selling%20a%20car%20with%20issues. https://www.statista.com/statistics/199983/us-vehicle-sales-since-1951/ https://www.doxo.com/insights/cost-of-car-ownership-in-the-u-s–auto-insurance-and-auto-loans-reports-2021/ https://www.google.com/amp/s/www.carprousa.com/blog/nada-first-quarter-2021-auto-industry-analysis%3fhs_amp=true https://www.statista.com/statistics/183713/value-of-us-passenger-cas-sales-and-leases-since-1990/ https://www.valuepenguin.com/auto-insurance/car-ownership-statistics#national https://www.experian.com/blogs/ask-experian/what-is-the-average-price-for-a-new-car/ https://home.treasury.gov/data/troubled-assets-relief-program https://www.bls.gov/iag/tgs/iagauto.htm https://www.ramseysolutions.com/budgeting/should-i-repair-or-replace-my-car https://www.edmunds.com/car-maintenance/fix-up-or-trade-up.html
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