Fix it or dump it?
You're looking at a P50,000 repair estimate for your decade-old car when an ad catches your eye: a brand new car for one peso downpayment.
At first, dumping your old car for a shiny, new, trouble- free unit might seem like a no-brainer. But the truth is, it's not always a good idea. On most instances, fixing you old faithful let you financially come out ahead. However, there are other important considerations when deciding whether it's time to say farewell.
Do the Math
At the very least, for a decent and reliable brandnew car, expect to spend a minimum of P 20,000 a month for a no-downpayment scheme. If your old car isn't giving you any headaches except those regular preventive maintenance checks (PMS), why spend that much? This depends on the severity of your car's problems though. With that kind of monthly scheme, you can pay a lot of kinds of repairs.
Of course, there comes a point when it isn't worth pouring money into a clunker.
When to give up?
When your car's repair costs starts to exceed the vehicle's value, then it's definitely time to dispose. You got to ask yourself this question,"Once it's fixed up, what will it be worth and how long will it continue to run reliably?" As an example, I've spent P100,000 on replacing some PMS parts on the engine and the suspension of my car. This was after it ran for 80,000 kilometers for 5 years. The car, I reckon, will still run reliably for another 5 years. If you do the math, that's only 20,000/year on major parts. If your car incurs an annual maintenance bill of almost the worth of an annual amortization for a brandnew car, then it's time to break up with it.
Beyond weighing maintenance and repair costs, compute savings from acquiring a new car. Savings come from better fuel efficiency. Do these new cars really save us gas mileage? Everybody wants to debate on this. Old cars (5-10 years old) can still be efficient daily drives as long as maintenance is religiously followed. To help answer the question, do some good research. Ask new owners about the gas mileage of their cars. Compare it to your old car's gas consumption and do a cost-per-kilometer comparison.
Here are some thoughts to ponder:
Fixing your old car
- You know the car's history
- Cheaper than buying a new car
- Yearly Registration and Insurance Cost
- Probability of Higher Gas Mileage
- Reliability Issues
Buying a brandnew car
- Trouble Free for the next 3-5 years
- Value for money payment schemes with freebies (3 years registration, insurance and Mortgage Fee)
- Newer cars are more efficient
- Newer cars have updated safety features
- Warranty (Tricky)
- High Monthly Amortization
- Watch out for that Lemon
I almost forgot to include that new-car smell though. That smell of success, is there a better smell on earth? It's not really a requisite but it somehow gives you some peace of mind.This means, if your old car frequently breaks down and you feel always uncertain that you will reach your destination, then that's the time you need to change.
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