a 60k, 11yr old toyota? i bet the OP would trade his suv for your toyota.
Lots of great advice above here. I get this question all the time and I always answer “The very second you start to think you need a new one.” Of course, that only applies if you have the coin to get a new one. On the analytical and life experience side, I refer folks to this story written by CarTalk’s Craig Fitzgerald. He is the guy I look to for answers on big picture car stuff. He’s my boss at BestRide too, so any bias is purely intentional: 
Thanks - This is precisely the sort of thing I was trying to find. I’ve owned several cars over the years and with those previous models, things happened (usually #1, #4, and #7 in your sister’s list) where the call to get a new vehicle was easy to make. This is first time I’ve encountered #5 in your sister’s list, in which I had a good track record for the first 9 years then suddenly find myself with several consecutive repair bills ($400-700 range). My emotional reaction was “Oh, great… Am I going to start having lots of failures from here out?” It has about 170,000 miles on it and the body’s in decent shape with no rust so I figured it had some life left in it. But… I’d rather get rid of a car one year too soon than one year too late.
As I explained in a previous post, my benchmark was cost of repairs relative to the cost of the vehicle whereupon other posters suggested better ways of making the call, so everything in this thread has been helpful to me.
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Yes, I am semi-retired and some months I spend more time in rental cars (on travels) than in my own. My brother on the other hand has a Toyota in the family that has travelled 375,000 miles and has had no internal engine work done on it,. One of his kids drives it to school.
Good point! I once had a boss who traded cars so often that we thought he traded “when the ashtrays were full.” Over the 6 years I worked there, he had a Corvette, Alfa Romeo, Ford Escort GT, Ford Mustang, and a Nissan ZX 350 sports car…
Like me, he liked cars but unlike me, He squandered big bucks.
It’s interesting that there’s been no comparison of the cost of a new car to the repair/keep costs.
I seem to roughly remember a formula based on the cost of a new car versus the the cost of the repair (or some stand in for the cost of repair).
So if a new car will cost $400 per month, that’s $4800 in the first year (even without adding in something for the cost of a down payment). And so if the cost of repairing the old car in 12 months is more than that, then the new car is more attractive.
If the annual cost of repairing is less than $4800, then maybe the trend in repair costs over recent years is the place to look. Has that been going from $1000 to $2000 to etc per 12 months? If so, then it’s reasonable to think that $3000 or more is coming.
Some things cannot be quantified. When a new car is due is one of those things.
Most of my new car purchases have been motivated by life changes. There’s no way to quantify that into a formula. A variable for each possible life change? The formula would be 1,000 pages long.
Good points. You can actually get the amount of depreciation frrom various books or the AAA website, where you can compare the value of a 2007 car to the value of a 2006 car. I use straight line depreciation of 10% per year which is not a totally realistic method, but we keep our cars a lot of years.
Keep in mind that cars deprecate a different rates: luxury cars depreciate the fasted and good economy cars the slowest. In general a car will lose 50% of its purchase price in the first 4 years.
In any case, a $40,000 Ford Explore will be mostly depreciated by year 10, but a new one will depreciate about $6000 to $8000 in the first year; that buys a lot of repairs.
Businesses can deduct depreciation , so they trade more often.
In spite of all this many of us here still recommend trading a German, British or Italian car when the warranty is up. The main reasons are lower reliability and the high cost of repairs compared to US or Japanese and Korean cars.
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Personally if the repair interval is too short and I get tired of driving the car, I get a new(er) one.
For example my old car had too many things going wrong with it. If only the engine was bad, I would have replaced it with junk yard unit. But a/c, window regulators, moon roof, rear speakers were also bad.
Here is a scenario: Suppose I own a 2006 model car—say it is a Chevrolet with over 150,000 miles. It runs well and doesn’t use oil. Neither the body nor the frame shows rust. Let’s say the book value is $2200, but it is going to need a transmission overhaul of $2000. Let’s also assume my funds are limited. Now, I can’t buy much of a car for $2000. Even though the repair is about the book value of the car, I know this car. It might be worth the repair. The gamble is that if the car is totaled and the other driver is at fault, I will only collect the book value of the car and will lose the money I put into the transmission repair.
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Please help me understand this a little more.
I take “annual cost of ownership” (ACO) to mean cost to acquire the car and any repairs outside of routine maintenance/consumables.
So take the case of a car that cost $24K and had no repairs in the first 12 years. The ACO at 12 years is $2000.
If instead at the 12 year mark, the car had already accumulated $1200 in repairs over time (as a single repair or multiple small repairs), the ACO at 12 years is $2100 (because of $24,000 + $1200 divided by 12).
Now at the 12 year mark, if a $2050 repair is needed, the accounting view would say time to trade the car without the added $1200 in repairs over time (because $2050 > $2000) while ‘don’t trade’ follows for the car with the added $1200 in repairs over time (because $2050 < $2100).
(Of course the numbers are contrived, but I’m pretty sure the reason for my uncertainty comes thru.)
Find a local trade school training future mechanics.I usually bring them parts and they fix it.I give them a tip…I’m not a cheapstake
Annual ownership is depreciation, gas, maintenance, repairs license, and insurance. The annual cost of this keeps decreasing as the depreciation gets less and less. At the same time the repairs will start increasing. There will be a cross over point where those yearly totals compared with the AVERAGE ANNUAL COST to date is exceeded by the actual annual cost for that year. The reason for taking the average annual cost to date is that you have to replace the vehicle with a new one or a much new one than what you have now.
Most decision makers only take the repairs and compare to the depreciation for that year; it’s a short cut but ignores financing costs for a new car and any change in gas mileage and insurance that may have occurred.
In your calculations you are ignoring the yearly depreciation cost which is very large for a new car.
They’re also protecting the image of their company. Company vehicles are there for business use, and that exposes the company name to the industry it sells to or contracts with.
It’s also generally cheaper to provide a company vehicle to someone who travels on business often, like a salesman, than it is to pay mileage.
Companies often present company cars as “perks”, but they’re just good business.
I’m not sure how adding depreciation, gas, maintenance, license, insurance, finance costs, etc (things other than repairs that I focused on) makes a difference – because their inclusion just means the average annual cost (AvAC) will be higher.
IOW, instead of $24,000 total at year 12, with all those additions, say it is $36K (or $48K or whatever) for a car with no (or few) repairs. That will give one number for AvAC.
For the same car if more repair costs happened during the 12 years (and because the other costs like gas, maintenance, etc don’t change appreciably), the AvAC will still be higher (like in my simplified example).
I appreciate the idea of comparing actual annual cost (AcAC) to AvAC, but the AcAC (to be used at year 12 includes that sudden repair cost) and is the same despite the two possible different AvACs.
+1
My desire for something new usually sets-in somewhere around the 10-11 year period, but I want to add (my) #10 to your list:
- When I want new safety features that were not available years ago.
Agree. I’ve had some nice business cars and they were traded at 3 years on average. The nicest one was Oldsmobile Delta 88 loaded.
All cars had to be American models and have 4 doors. On my last car, a Chevy Impala, I talked the purchasing department into ordering a trailering package with heavy duty everything.
To simplify decision making you could ignore those other things, except that new cars cost more to insure and there are financing charges if you don’t pay cash.
However, if a $40,000 car is 10 years old, and is worth, say 6000 dollars, then the average depreciation over the 10 years will be 34,000/10=$3400. that’s the figure you have to use to compare your annual current REPAIRS (excluding maintenance, which you have with a new car as well).
So, other things being equal, you can do $3400 in repairs before your current car gets more expensive than buying a new one. That’s about as simple as we can make it, unless the car is very unreliable, in which case you may have to decide it’s more important to arrive on time and keep your job.
Click and Clack told us for years that you compare any repair with a monthly payments on a new car.
Multiply that by 12 and it soon becomes apparent that repairing an older car is more economical, provided the rest of the car is not on its last legs.
Before going further, does the $40K in your example include all the costs you mentioned (gas, maintenance, repairs, license, interest, insurance, etc)?
This is the ‘roughly remembered’ method I mentioned earlier in this thread.
To simplify the comparison, I am assuming that both old and new car have the same insurance and other fixed costs. The $40,000 is the capital cost to purchase the vehicle in the first place. That amount depreciates rapidly initially and after 10 years is a small fraction of the original purchase price. So, if gas consumption and other operating costs remain the same for old or new vehicle, we only need to address the depreciation of the new vehicle under consideration with the REPAIR only costs of your present vehicle.
Car salesman will quote a very low monthly payment to get you to buy the car. On closer examination that would likely be 60 months of payments.
Click and Clack did not want to go into the level detail that we are going through here. Monthly new car payments over a 3 or 4 year term should be enough to have anyone consider doing a major repair, provide the rest of the car is relatively good.