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?

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.
posted by Juffo-Wup to Work & Money (20 answers total) 7 users marked this as a favorite
Response by poster: Edit: I meant pads, not calipers, in the list of maintenance items above.
posted by Juffo-Wup at 10:49 PM on July 18, 2008

I don't have any such formula, but for a Toyota that's been taken care of, 200K miles is just broken in! There's no reason to believe, from what you've told us, that you won't get at least another 100K miles out of that car if you continue to treat it well. I would suggest finding the average monthly maintenance cost of that car since you've had it and weighing that against new car payments.

Also, $1200 sounds high for just rear struts. Was that quote from a dealership by any chance?

Full disclosure: I'm a certified Toyota mechanic, since retired
posted by bizwank at 11:00 PM on July 18, 2008

That quote seems kind of ridiculous, I'd definitely shop around. Buying a newer car is usually not the way to save money, even with an old Toyota. It's more of an emotional decision, rather than a financial one. Keeping the current car almost always wins, if you're looking at it from a purely financial perspective.

Just remember, if you buy a five year-old Toyota, it's still going to need maintenance. Cars always need things like tires, brakes, oil changes, coolant flushes, timing belts, clutches, alignments, etc, etc. Also, I would suggest not buying a car if you have to take out a loan for almost its entire value. The result in that situation is the car depreciates faster than you pay off the loan, and you (almost immediately) owe more on the car than it's worth. Don't buy a car you can't afford.
posted by knave at 11:10 PM on July 18, 2008 [1 favorite]

The general formula is that in almost all cases keeping an older car on the road is cheaper than buying a new one. There are exceptions -- if your car caught on fire and needed a total restoration, it would not be cost effective to do that much work to an old car. But as a general rule, keeping it running is cheaper. (The complications come not from repair cost, but from harder to monetize issues like safety, handling, and inconvenience of random breakdowns -- if those things become an issue, it is really hard to compare because the old car can't provide them at any cost.)

There are rules of thumb like don't make repairs that exceed the value of the car, but that misses the real math, which is the cost relative to a new(er) car.

Personally, I do the same math you did: cost of repairs compared to monthly payments of a new car; this gives you the number of months it takes to make a repair pay for itself. I've never yet had to get rid of a car because of repair costs, although I've sold plenty when they became unreliable and couldn't be counted on to get me to work.

So as long as the car is giving you acceptable reliability, I'd suggest continuing to make the repairs as long as the running average is not getting too close to the cost of a new car. It's the running average cost that really matters, not just how painful this month is -- you want to see how much you are spending over a couple of years, and whether that curve is staying flat or trending up or down.

And make sure you are using realistic numbers -- would insurance really be that much more, or would it be even more expensive? (You only need liability insurance now, because your car is cheap, but if you have payments you will need full coverage.) Could you buy a car you want for the amount you have budgeted? Does that budget include tax, title, and licensing (or whatever the transaction costs are in your state)? What is your maintenance budget for the newer car -- I think even a 2004 Camry would be out of warranty, so if it needs repairs you are on the hook for those, just like with your current car.
posted by Forktine at 11:17 PM on July 18, 2008

Exactly- what costs more- maintaining an existing car or buying a new one. Maintaining the existing one almost always wins.
posted by gjc at 11:21 PM on July 18, 2008

Something else to consider when comparing a Camry with a Corolla is the likely cost difference in fuel consumption, something that is only likely to become more pronounced over the coming years.
posted by rodgerd at 11:30 PM on July 18, 2008

Struts for your car appear to be about $90 a side. Given a high markup and miscellaneous costs, I don't think there's $800 in labor to replace them. Get those other quotes.

The best thing to do as far as determining whether or not you should be shopping for another car is to get yours completely checked over by a good mechanic. You'll want a compression test done, for starters. That and the oil usage of the car can help them determine how long the engine is going to last. Knave is exactly right that any car you buy will require maintanence, so don't be too quick to let recurring costs be the deciding factor in whether or not to buy another car.

Also, if it turns out a newer vehicle is indeed in the cards for you, I recommend you google any vehicle you're considering. For example, do a search for 2002 Toyota Corolla reliability. The links from howstuffworks.com have tons of useful information on what breaks on what vehicle and how much it might cost to fix. (One thing I've found is that Hyundais have become extremely reliable cars, while Toyotas have been plagued by some engine management component issues of late. That was news to me, since I'm a Toyota guy. )
posted by azpenguin at 11:38 PM on July 18, 2008

Is this what you wanted?

Speaking from personal experience, that Camry may be coming up for some serious transmission work in the next 50 to 100k.

However, given all that, I'd still keep that model year car if I could.
posted by abdulf at 11:43 PM on July 18, 2008

If the struts are rattling over light bumps (but show no other signs of wear) then the top mounts, rather than the strut itself, are most likely the cause of the noise.

However, 200,000 is more than enough to kill shocks. Also, $1200? I'd expect two gold plated struts, a full valet with the seats replaced with diamond impregnated covers and a full massage while I waited for that money...

Replacing struts is a really easy job. In case anyone is pulling a fast one, you probably just need the inserts (if appropriate for your model) and, as I said, the top mount. I'd expect something in the realm of $500, and I'd trust nearly any halfway reputable place to do it - it's pretty hard to screw up, and so not something that MUST be trusted to the dealer or suitable expensive alternative (like transmission work would be, for instance).

Also, calculating some kind of formula is kind of irrelevant. If you are happy enough with the car, there is really no problem with keeping it. It is unlikely to cost you $300 a month to run it (the cost of the loan) so the longer you keep it, the more money you save. I'd get pre-approved for the loan and just run the car until it died, personally. Any car that is worth $1000 is perfect fodder for just running until it rattles to death, which a 200,000 mile Camry is a long way from.

I'd say just keep it, and reduce the maintenance costs as much as you can (spend more time shopping around for quotes and understanding better precisely what needs replacing).
posted by Brockles at 7:06 AM on July 19, 2008

$1200 for two struts and labor on a Camry is completely ridiculous.

For reference a set of front struts (more complicated) for a mid-1990s Toyota 4Runner cost about $220-240 for the parts. These are significantly beefier items designed for a light duty 4x4 truck.
posted by thewalrus at 7:23 AM on July 19, 2008

go to the bad part of town and find the old time mechanic who is well know for "saving" cars. Whenever you have a car that's that old with that kind of miles you should be using bargain rate mechanics, not the local guy who makes his money fixing late model cars. Going to these kind of shops will routinely save you at least half off the normal cost of fixing the car and will keep you on the road. Just remember in old cars like that only fix what keeps the car from moving - no extras - because you never know when something big is going to go and you don't want to get caught junking a car with a brand new water pump that really didn't need changing. That's another benefit of the bargain rate mechanic - he'll only fix what is necessary.
posted by any major dude at 7:33 AM on July 19, 2008

Car Insurance Gas Repair Total
Year 1 1000 600 -500 -1200 -100
Year 2 1000 600 -500 0 1100
Year 3 1000 600 -500 0 1100
Year 4 1000 600 -500 0 1100
Year 5 1000 600 -500 0 1100
Year 6 1000 600 -500 0 1100
Year 7 1000 600 -500 0 1100
Year 8 1000 600 -500 0 1100
Year 9 1000 600 -500 0 1100
Year 10 1000 600 -500 0 1100
Total 10000 6000 -5000 -1200 9800
Selling Camry -750
Total Cost of Corolla 9050

Here are my assumptions: $10000 cost of car spread out over life of car (10 years). Insurance of $600 extra each year (50*12), but bear in mind that insurance costs will go down SIGNIFICANTLY if you're a safe driver over the next couple of years, gas savings of $500 per year (23 mpg vs. 30 mpg at 13000 miles/year), and I couldn't really speculate on repair costs. Obviously repair costs over 10 years will likely save you between $3000-5000, since the Corolla will be newer, smaller, and parts will be more available. So if you add that repair estimate, your Corolla will cost you $4000-6000 over the life of the car.

My opinion is that you should take the plunge and buy the Corolla. Between the gas savings, repair costs, and likely insurance rate decrease, you're getting a newer, more dependable, safer car at nearly bargain basement prices (compared to constantly repairing your car).
posted by SeizeTheDay at 7:41 AM on July 19, 2008

Obviously repair costs over 10 years will likely save you between $3000-5000

That has no logical basis. What are you assuming? That a newer Corolla won't need servicing? Parts will not necessarily be 'more available' as the existing car is hardly old or rare and there are literally millions of them around, but the newer parts for the newer car are almost guaranteed to cost more and more rigorous servicing will be necessary as the car will be a bigger investment (and hence risk).

Running costs of the newer car are more likely to be higher than that of the old one. Old cars can be made to kick along with much less money being spent on them because, at most, you are risking $1000. If the car breaks fatally through cheap-arsed servicing, then you only lose a grand. If you skimp servicing (regular maintenance and following the service schedule for parts replaced - the best path with a newer car) then your new car risks much more because it is worth more.

You will save money on servicing costs with the older car - it will, without question, cost less to keep on the road. Servicing to ensure the long term reliability and resale value of the car is simply not necessary with a cheap car near the end of its life. You can just replace the things that are safety issues or that break. With an older car, you can (if the aforementioned transmission fails) get a second hand one from a crashed or scrapped car fitted. This will be a fraction of the cost of a similar failure on a new one.

The only saving you will make on the new car will be the fuel.
Insurance will be more with the new car (the reduction for years driving will apply to both cars, it is not weighted to age of car in any way).
Parts and servicing will be more.
Fuel will be less.
Added to all this is the cost of the loan.

Per month, you will be significantly worse off with the newer car.
posted by Brockles at 8:30 AM on July 19, 2008

I had my rear struts replaced for $270 last year. Disqualify the ripoff artists who quoted you $1,200.
posted by gum at 8:32 AM on July 19, 2008

What are you assuming?

I'm assuming that over the first 3-5 years of ownership of the newer car, repair costs on the newer car will be substantially lower. The older car has a better chance of requiring a new compressor, condenser, transmission, fuel pump, brake pump, electrical problems, among a myriad of other things that can go wrong on a car. And in the first few years, because the Corolla will have significantly less miles and less years, the costs for repair will be monumentally lower. Over the next few years (aged 5-10 years), costs will increase with wear, mileage, and age, but at a lower rate, because the car is smaller and newer. The older a car gets, the better the likelihood of something going wrong.

Running costs of the newer car are more likely to be higher than that of the old one.

Cost of ownership may be higher, which I'm clearly not debating, as my model up above clearly shows you have to pay for the Corolla, but running costs will be significantly lower on the newer car. To assume that running costs on a newer car are greater than on an older car is patently absurd.

the reduction for years driving will apply to both cars, it is not weighted to age of car in any way).

Incorrect. Insurance, at some point, hits a floor, at which point you can't get any cheaper insurance unless you cut out comprehensive and collision insurance. Granted, newer cars have higher premiums, but as the car ages, and the driver's record gets better, the premiums will fall, making cost of insurance negligible after 2-4 years (depending on a variety of circumstances). My guess is, given the older car's age and mileage, the original poster has already hit the floor with that car. Which means that insurance costs on the newer car, while higher now, will only go down (unless the OP racks up a bunch of speeding tickets and accidents).

OF COURSE buying a car is more expensive than fixing an old one. But I think that given the marginal added cost of buying the Corolla (spaced out over 10 years), the value added of safety, reliability, and better fuel consumption, outweigh the absolute savings of keeping the older car.
posted by SeizeTheDay at 9:11 AM on July 19, 2008

My rule of thumb tends to be... suspension/brakes/tires are standard wear items - and arent very expensive. Any car will need them routinely (every 60k-100k), and it isnt something I would hold against the vehicle.

If your car needed a headgasket -- I would be borderline. ($1k)

If it needed a transmission - I would probably be looking at a new car. ($1.5k)

I can't find the figure, but the average vehicle needs $600 in maintenance a year, and as they get older they need even more. That being said; the Camry seems like its in pretty good running shape? I would find a garage that will do the job for $300 with quality parts (ie, not the cheapest struts available that will crap out in 15k miles) and drive that sucker another 25k miles.
posted by SirStan at 9:31 AM on July 19, 2008

Older cars also have the benefit of being brain-dead simple. No fancy O2 sensors, no OBDC II at inspection time, and are much cheaper to fix generally (I just put $600 of Oxygen sensors into my 2002 Maxima!) My Camry had was practically spitting raw gas out the exhaust when the wires were bad, and kept on running like a champ. Your going to face the eventual wear of components -- but you know what those are, and should be expecting it. Frequently newer cars (especially new model years) don't have after market parts out -- and you need more dealer specific parts ($$$).
posted by SirStan at 9:34 AM on July 19, 2008

To assume that running costs on a newer car are greater than on an older car is patently absurd.

Not at all. Not even close - you obviously have never run an older car (or at least not a reliable one). For just one of the many examples in owning old heaps for the last 15 years (as well as some shiny newer ones) old cars cost next to nothing to run: My current car has cost me around $200 in repairs in the 18 months. Total. That includes all 'servicing' and only excludes an emissions test, insurance and parking permits (as any car would need that).

Try and get a yearly service done on a 4 year old Corrolla for anything close to that money.

Old cars don't cost as much to run because they don't need maintaining to as high a standard as newer cars because you aren't risking a sizeable investment to do so. You don't need to pay extra for repairs that will last 5 years or more when you have one, because the car won't last that long. So you save your money. You don't have to worry about affecting resale value, or whether something else will break in the long term. There is no long term.

If you try and maintain an old car the same as a new one, you risk it costing the same or more. If you maintain it in relation to its age and expected/required life, costs will be much less. As mentioned above by someone else, driving an old banger can significantly reduce even labour costs, as you don't need to go to the best mechanic in town any more. Keeping a car running, as opposed to 'keeping it in sellable condition" are very distant levels of maintenance in terms of cost.

I'm assuming that over the first 3-5 years of ownership of the newer car, repair costs on the newer car will be substantially lower.

Repair costs, possibly but not definitely. But repair AND servicing costs? No way. There is a greater chance of something expensive breaking on the old car, purely by statistical analysis, but there is also no definite guarantee that anything will break. It's possible nothing expensive will break on that car for another 5 years. Hence my earlier comment about "stay with the old car and buy the newer one if something expensive breaks". Until something expensive does break (a fairly small risk, especially for a Toyota that has been looked after as this one seems to have been) the running costs for the older car will be much less.

Insurance, at some point, hits a floor, at which point you can't get any cheaper insurance unless you cut out comprehensive and collision insurance. Granted, newer cars have higher premiums, but as the car ages, and the driver's record gets better, the premiums will fall, making cost of insurance negligible after 2-4 years (depending on a variety of circumstances). My guess is, given the older car's age and mileage, the original poster has already hit the floor with that car.

But it will always be more than the old car, it just may eventually hit the same level as now when the newer car gets much older. Insuring newer (comparable) cars is always, always more expensive, and the 'floor' is not lower for new cars - they are worth more, cost more to repair and replace and so will always cost more to insure. Insurance is related to the value of the car and the cost of repair and replacement. Newer cars cost more and they cost more to insure. Suggesting anything other than that is absurd.

The older car WILL be lots cheaper to run precisely because you can cut out things like comprehensive coverage. It's only $1000 of car. There's no point spending an extra $300 a year to insure it if it gets stolen. The chances are much higher, and you won't recover the lost $700 (if it happens in heh first year) because of increased premiums, deductibles and other expenses. A car worth that little should get minimal insurance and just write it off if it gets trashed or stolen. It's much cheaper that way.

But I think that given the marginal added cost of buying the Corolla (spaced out over 10 years), the value added of safety, reliability, and better fuel consumption, outweigh the absolute savings of keeping the older car.

That is fine as an opinion, you may well be right. But don't try and dress it up as being ultimately cheaper. It isn't. Nor, in fact, is the additional cost marginal, when you consider it may be $300 a month or more. The conclusion you present is not at all supported by any of your arguments, most of which are misguided. The only advantage is the fuel, all other costs will be higher.
posted by Brockles at 9:39 AM on July 19, 2008

Older cars...and are much cheaper to fix generally

I always felt that way about American cars, but never had such luck with foreigns (granted, I've always worked with Germans).
posted by SeizeTheDay at 9:39 AM on July 19, 2008

This problem interests me too, my old Subaru wagon has started to have things going wrong. In no specific example can we predict longevity but if we start thinking statistically maybe there's a guideline. I suspect the answer is "for a given model year, it's still worth fixing if yours is not the last example running in your neighborhood". Special cases aside - I saw a showroom-looking Yugo the other day - if a population of cars follows the "bathtub" failure curve, the length of the floor of the bathtub is going to be characteristic of the car. Once the wearout part of the bathtub curve starts to be in play, the odds of a failure begin rising - that's where things begin to get expensive. The nice thing about a local population is that it takes into account local conditions like salt on roads, or driving in heavy traffic a lot.
posted by jet_silver at 9:41 AM on July 19, 2008

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