Should You Pay to Fix an Older Car, or Just Buy a New One?

It really depends on the cost involved, and on other factors.

When my husband and I bought our Prius back in 2007, we were among the first of our friends to have a hybrid vehicle. And since gas prices were up at the time, we enjoyed lower credit card bills by virtue of not having to fill up our car as often.

In 2020, our Prius started giving us trouble and we learned we'd need to replace the battery. Only since this is a hybrid car, not a regular one, a replacement battery doesn't just cost a few hundred dollars. Rather, we were looking at a $1,500 outlay.

We weren't sure if spending the money on an older car was the right move. But then we did the math and figured that if we were to lease a replacement car, we'd be looking at around $400 to $500 a month.

All told, we determined that if we spent the $1,500 and got at least four more months out of our Prius, which was likely, we'd break even. And if we got more than four more months out of the car, we'd come out ahead by making the repair.

Fast forward two years, and the Prius is still hanging on. Granted, we don't expect it to stick around all that much longer, and at this point, I don't know that I'd be willing to sink $1,500 into it. But clearly, fixing it up two years ago was the right call.

If you have an older car that needs work, you may be wondering if it pays to pump money into it or just get yourself a replacement car. The answer? It depends on the cost of the work and the extent to which it's likely to extend your car's lifespan.

A tough call

Right now, car prices are way up across the board. Even if you're willing to skip the fancy features and stick to a basic car, you're still looking at spending more money than usual. And if you need to finance a vehicle purchase, you might get stuck with a higher interest rate on your auto loan, since borrowing rates are up across the board too.

That's why it could pay to fix up an old car and get a little more use out of it -- but only to a point. Basically, you'll need to do what I did a couple of years ago and calculate your break-even point.

So, let's say you're looking at a $1,000 repair for a 15-year-old car, but your mechanic thinks that by spending that money, you'll get a minimum of six more months out of your vehicle, and possibly more. That's a repair that could make financial sense, because these days, even a very inexpensive monthly lease or car payment is going to cost you $350 or $400. And you may be looking at a lot more.

On the other hand, let's say you're looking at a $3,500 repair that might buy you six more months with your vehicle. Suddenly, the numbers seem to favor going out and getting a new car.

A newer car could save you in other ways

When you have an aging car, you never know when you might spend money to address an issue only to encounter another issue a few months later. So if you're looking at a costlier repair and not too much upside (meaning, the repair is only likely to extend your car's lifespan by a few months, not a few years), then you may just want to get yourself a new vehicle that's unlikely to need repairs in the near term.

While cars today are generally expensive, if you shop around and do some research, you may be able to find one that's reasonably affordable. And if you have a great credit score, you might eke out some savings on an auto loan despite rates generally being higher.

One thing you don't want to do, however, is let your emotional attachment to a car lead you to make a poor financial decision. You might hate the idea of giving up the car you love, but if you're looking at a $5,000 repair to maybe get another year out of it, it's just not worth it. And in that situation, it's important to rely on numbers more so than feelings.