Repairing an Old Car vs. Buying New
Some common phrases I hear when people buy a new car include variations of: “It was more expensive to repair than to buy new,” or “The repair cost more than the car.”
At the risk of sounding like a curmudgeonly financial advisor telling you never to spend any money, I’m going to debunk these claims. But before I do, let me say this—if you can afford a new car, go for it! New cars are great. They reduce stress, eliminate hassle, and, for some, bring real enjoyment. But it’s rarely an economical choice.
To be fair, I’m writing this while waiting for our old Toyota Highlander to finish its 100,000-mile service, plus some extra repairs—costing more than $1,300. So, maybe I’m just trying to make myself feel better about the expense.
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Now that modern cars last well over 200,000 miles with proper maintenance, the cost-benefit analysis overwhelmingly favors keeping your current vehicle. One key reason is depreciation, which hits new cars the hardest in the first few years. New cars lose value rapidly, with the steepest depreciation occurring within the first few years. On average, a new car loses 20-30% of its value in the first year and 50-60% by the fifth year.
Example: Repairing a 2018 Toyota Highlander vs. Buying New
Option 1) Repairing a 2018 Toyota Highlander
Instead of buying a new SUV, let’s examine the estimated repair costs for a 2018 Toyota Highlander with around 100,000 miles over the next five years.
Annual costs:
Regular maintenance & oil changes: $300 - $500 per year (source: KBB)
Potential repair costs over five years (source: KBB):
Brake pad & rotor replacement: $600 - $1,200
Timing belt & water pump replacement: $800 - $1,500
New tires: $600 - $1,200
Transmission service: $200 - $400
Suspension work (shocks, struts, control arms): $1,000 - $2,500
Total five-year repair cost: ~$7,000 average ($4,700 - $9,300)
Even factoring in some depreciation (though much less than a new car), let’s assume $10,000 in lost value.
Option 2) Buying a New 2024 Toyota Highlander
A 2024 Toyota Highlander starts at approximately $45,000 for a mid-trim model. By year five, that same vehicle might be worth about $25,000, meaning the owner loses nearly $20,000 in depreciation alone—more than twice the cost of five years of repairs!
When you add in routine maintenance and repairs, higher insurance premiums, registration fees, and loan interest, the total cost of a new vehicle climbs even higher.
Unless your current vehicle is experiencing catastrophic failure (such as a blown engine or transmission failure), keeping up with maintenance and repairs makes more sense. Even if you have a catastrophic failure, buying a 3+ year-old car would be wiser if you simply want to make the best financial choice.
That said, finances are only one part of the decision. As I mentioned at the beginning, there’s nothing wrong with buying a new car if you can afford it and if it will make your life more enjoyable and stress-free.
Happy Planning,
Alex
This blog post is not advice. Please read disclaimers.