Incentives on new cars are high, probably at an all-time high—this has a lot of car owners wondering: “Is my clunker a keeper?” It is a good time to buy a new car, but is it possible to squeeze another 50,000 miles or so out of your old car? What if your old car is paid off and in good condition? Are you thinking of buying just because it’s a good time or do you need a new car. These deals must have a shelf life, is it worth waiting? With so much on-the-line, I asked Jody Victor to answer these questions for us.
Jody Victor: Vincentric, an automotive-research firm, compared the cost of several new vehicles to their five-year-old counterparts. It was assumed the used vehicles were paid off and the new vehicles were paid for with five-year 6.6% loans and 15% down. Taking into consideration total ownership costs over five years: insurance, fuel, repairs and depreciation, survey says—your clunker might be a keeper.For example, a new Chevrolet Malibu will cost $33,064 over five years, or $7,343 more than the $25,721 it would cost you to maintain a 2004 model that's paid off.
The biggest expense for new-vehicle owners is depreciation, while maintenance and repairs remain the most common “big expense” for used vehicles. For five-year-old vehicles repairs can cost twice as much and maintenance as much as three times more.
Between the economy and the fear of unemployment more people are going with what appears to be the value route—keeping used vehicles and paying for repairs. R.L Polk an auto-info firm found that vehicle ownership length increased to four and a half years in ’08 (up from four years in ’02).
Another reason to keep that well-loved vehicle is that you must pay on your new car every month, with used cars some repairs are going to be optional. And if you've taken very good care of your used car you likely won’t encounter monthly repairs. There are two things to consider with old cars, though. First, a transmission rebuild is going to cost around $3,000. Second, if a used car has been unreliable or needed repairs from day one (in the case of secondary ownership). Either of these cases are so-called “deal breakers” when weighing the options of new or old.
Government incentives might make you consider sending the clunker to the junkyard. State and local taxes can be written off on new cars, light trucks, motor homes and motorcycles purchased from February 17 through the end of ’09.
Thanks, Jody! We'll be sure to use these tips before buying new!