Recent automotive industry news has many consumers thinking about holding on to their older car rather than purchasing a new one. While vehicles last longer now than they ever have, the main reason people hold on to their cars longer is the sticker shock of a new purchase. The average new car price today is about $48,000, double what it was 12 years ago. New fees – such as a market adjustment fee to cover semi-conductor shortages and documentation charges – can add hundreds if not thousands to the manufacturer’s suggested retail price.
How long can I expect my current car to last?
The average age of a AAA member’s car is 12 years old. Your car’s lifespan depends on how well you take care of it, and how well you follow the scheduled maintenance. Try to build a relationship with a good repair shop over time, so its staff understands your expectations and budget. They should also keep you informed about your car’s overall condition and perform routine maintenance. Some drivers will wait until the car breaks down or warning lights come on, but it’s always advisable (and less expensive) to do preventative maintenance, including oil changes, cabin- and air-filter replacement, battery cleaning, wiper-blade replacement and headlights checks. Find a AAA Approved Auto Repair shop near you.
Also, be aware of recalls. The National Highway Transportation and Safety Administration maintains a database of all recalls in the last 15 years. Enter your Vehicle Identification Number (VIN) on the NHTSA website to see if your car is affected.
Is it time to let go?
As a rule, if the cost of repairs to your current car exceeds 50% of its value, it’s time to replace it. However, if the repair is for the engine, transmission or hybrid battery and the rest of the vehicle is in good condition, it may be worth fixing. If you’re facing a major repair, make sure your car is both mechanically and structurally sound before you commit to the service. A vehicle that’s been around for a decade is sure to need additional repairs or parts in the future, and they could be pricey.
Deciding on a new car
There is a plethora of choices on the market these days. Yours can depend on your driving style, commute, cargo needs and more. Also, consider if you want a traditional gas-powered car, or a hybrid, plugin hybrid or electric vehicle.
If you’re considering an EV, there are tax incentives for both the purchase of the car as well as for a home charging station. For gas-powered cars, think about your driving habits, how often you expect to fill up, and the price of gas. And, if you’re taking out a loan, you’ll find interest rates have increased dramatically.
Be wary of longer-term loans. The dealer may find a way to make your desired monthly payment feasible, but if you take on a six-, seven- or eight-year loan you’ll be making car payments and paying repair costs. And, if you decide to trade in the vehicle after a few years, you may owe more than the car is worth.
The cost of owning and operating a car goes well beyond the monthly loan payment. The latest study from AAA revealed that the average cost is $12,182 a year, or $1,015 per month. This study factors in purchase price, depreciation, special features and add-ons, fuel, insurance, repairs and more.
What’s my trade-in worth?
Before shopping, do your homework. Check out what companies like CarMax, Truecar, Carvana and Vroom are willing to pay for your car. When you start negotiating for a new vehicle, it’s always best to consider the new car purchase and the trade-in as two separate transactions. Settle on a new car price without the trade, then bring the trade into the discussion.
Do I want a new or used car?
You’ve probably heard that a new car loses its value the minute you drive it off the lot, and that’s true. In fact, most cars depreciate about 20% in value in the first year of ownership. A used car might be a better choice, though inventory is getting tighter as people hold on to their personal vehicles longer. However, there are unique concerns that come with any used car purchase.
Used Car Considerations
Keep in mind that someone traded in that car you have your eye on because they kept it long enough, repairs were mounting up or it may not have been reliable. Certified pre-owned cars generally have better warranties and are in better mechanical shape due to a more rigorous inspection process.
One important note: With the increase in hurricanes and flooding, CarFax reports that nearly half of flood-damaged vehicles return to the market as used cars. Click here for a full list of signs that may reveal if a car has been flooded.
Find a great price on a new or used vehicle with the AAA Car Buying Program.
Does your car need an upgrade? Will you buy new or used? Tell us in the comments.