Old Car: How to decide on repair vs. replace?
July 18, 2008 10:39 PM Subscribe
I drive a 1992 Toyota Camry with just over 203,000 miles on it. As far as I know, the car is in good mechanical condition except that the rear struts are in fairly desperate need of replacement.
How do you calculate the payback period for repairing an old but paid-off car, and how might you use this information to help decide whether to repair the car or buy a newer used car?
posted by Juffo-Wup to work & money (20 answers total) 6 users marked this as a favorite
The Camry is paid off, starts reliably and runs smoothly and quietly. It burns about three quarters of a quart of oil every 3,000 miles, but its rear struts are shot. They make rattling noises going over even the mildest of bumps and over the past few months, the car's ride has become increasingly rough because of this.
So far, I have only obtained one estimate on repairing the rear struts and that estimate was $1,200. That sounds high to me and I plan to get one or two more estimates but regardless of the actual cost, I don't know how to compute the payback period of such a repair. (I'm also not sure that a 'payback period' is what actually needs to be computed in order to make an informed repair vs. replace decision.)
If I were to purchase a newer car, I would most likely buy a 2002-2004 Toyota Corolla, for which I would pay about $10,000. Given my credit rating, I expect the monthly payment on a 4-year $10,000 loan to be about $250. My monthly insurance payment would also increase by about $50, resulting in a net monthly car payment increase of $300. I could afford this but would prefer not to pay it if I don't have to; that is, if it wouldn't cost me even more money to keep my current car running. I expect that I could sell my car in its current condition for about $1,000, which I could use against the first three months' payments or as a down payment, lowering the loan's principal by $1,000.
My initial line of reasoning was as follows: If I pay $1,200 to repair my car, and the car works for another 4 months without needing any further repairs, I will have broken even on the repair since $1,200 divided by 4 (months) is $300. I soon came to realize that this line of reasoning assumes that the car would become undriveable within 4 months if I do not have it repaired. I do not know whether this is the case but I suspect that if push came to shove, I could probably drive the car to and from work (40 miles round trip) for at least another four months without repairing it, letting the ride become rougher until the car possibly shakes some other vital component loose into a state of total malfunction.
As far as other maintenance goes, I replaced the battery and flushed the engine's coolant last year, flushed the transmission fluid (because the torque converter lockup mechanism was sticking; the flush completely fixed this) and replaced the radiator (its plastic end-cap had cracked open) about two years ago, installed new rotors and calipers on the brakes about two years ago, had the air conditioner's condenser replaced about four years ago, and replaced the timing belt at 150,000 miles. I replaced the front struts about 5 years ago as they had gone bad. I'd say the tires have about 25,000 miles left on them.
If I drive the car until it literally dies, I guess I'd be on the hook for the cost of towing it to a junkyard as well as a couple days' rental until I could obtain a newer car. If I preemptively buy a newer car, I feel like I'd be unnecessarily making large insurance and loan payments.
Is there some general formula that can be used in situations like this to help indicate whether a repair is worthwhile? I would also appreciate any specific advice any of you may have.