7 January 2019 Concept Car
To repair your car or to replace it? We’ve all been faced with that question at one point or another. Unfortunately, finding a suitable answer hasn’t become any easier.
On the one hand, the ecology movement has quite rightly questioned our habit of casually throwing away products that no longer work. On the other hand, many products these days are built using larger, fixed components. These can no longer be replaced by users without expert guidance. They frequently tend to be more expensive than a replacement as well.
It may sound as though the dilemma between repairing and replacing were a new one. In reality, it’s been around for decades, possibly even longer.
This does mean that there are no easy solutions. It, however, also means that there are many useful ideas about how to approach the problem. In this special, we’ll show you the best rules for deciding whether to replace or repair your car.
Some of them will seem sensible right away, others may require some practical experimentation. Yet others may actually be wrong. Either way: After digging through our recommendations, you’ll at the very least come out feeling less intimidated.
The limits of mileage and age
Rule #1: Repairing is always cheaper
A little bit of repair theory
That’s when I reach for my shotgun
The 50% rule of repair
The 50% rule Part 2: A different spin
1/10th of value rule
The 50/20/30 Budget Rule
mpost-repair – msalvage = rvalue-added
Can you do this yourself?
Slightly bigger repairs
Some of the best online repair channels
Replacement at CCC
Maybe you’re asking yourself whether you really need to read through this entire, rather lengthy article. Wouldn’t it be a lot easier if you could just use some basic considerations about the average life expectancy of a car and then use these to estimate whether it makes more sense to buy a new car?
Some have indeed tried to do just that. Car website CarX recommends replacing your car if it’s up for a major repair and if it’s already older than ten years or has more than 150,000 miles on the odometer (which, if you’re using average driving mileage, is actually the same).
This, let’s be perfectly clear, is not a sensible approach. It says nothing whatsoever about the condition of the car. It disregards the fact that different models will have different life expectancies. And it ignores the well-known insight that these days, 200,000 miles are really nothing, as most experts agree. With a little care, you can easily drive your car for a lot more miles and many more years than this. So if you’re looking for a rule to base your decision on – this isn’t it.
Fortunately, we do have a basic rule to offer you. In fact, this rule is so simple that it may seem like it can’t be true.
This sounds like a pretty bold and generalising statement. And yes, we may be exaggerating just a little for effect’s sake. Still, repairing your car will be less taxing on your wallet than buying a new one, roughly 90% of the time.
Curiously, this rule feels counter intuitive. In reality, it’s pretty straight forward.
Let’s take a simple example to demonstrate our point.
Imagine you own a ten-year old car. Its current value sits somewhere around £1,500. Suddenly, you’re faced with a pretty big repair: You need to install a new motor. Total costs are estimated around £700. That sounds like a pretty big bill. Wouldn’t it make more sense to buy a new car straight away rather than investing into this old pile of garbage?
As we’ll show you in this article, there are many ways of approaching this issue. However, you should always be aware of one thing: Even £700 are nothing next to the cost of buying a new vehicle.
Even if you replace your car with an identical, ten-year old model, you will pay £1,500 rather than £700. And who knows – that ‘new’ car may break down within a few months of buying it as well.
Better cars are obviously a lot more expensive still. A six year old version of your car may set you back £4,000. You can get a lot of repairs at that price.
There is most definitely a point when replacement becomes the cheaper option. Most of the time, however, repairing is the most cost-effective approach.
That said, it is questionable whether you should take care of the repair yourself or leave it to the experts. So before going into the hands-on details of repairing versus replacing, let’s first dedicate some time to this even more fundamental question.
In 1974, Robert M. Pirsing published the now classic Zen and the Art of Motorcycle Maintenance. It was a book about many things: The relationship between a father and his son, notions of quality and a roadtrip from Minnesota to Northern California.
Why are we talking about philosophic books in this article?
Because ‘Zen’ was also about something entirely different: Why repairing technical devices comes so naturally to some, while it seems like a complete mystery to others.
To be able to properly repair a motorcycle, Pirsig claims, we have to enter a different mindset. We have to see the motorcycle as an organism and its malfunctions as messages. We also have to regard the process of repairing as an experiment: You set up a hypothesis, then you test it. You then continue doing this until you find the cause to your problem.
This information may seem a bit redundant. And maybe it is. But one thing’s clear: If you want to perform a repair yourself, you’re going to need a plan.
So how to approach this?
You may be surprised to hear that some very smart people have literally invested hundreds of hours, if not more, thinking about this. Jason Maxham, author of the programatically titled The Art of Troubleshooting, is one of them.
Spending just a few minutes on Maxham’s website can make you dizzy. It is filled to the brim with both deep ponderings and highly practical troubleshooting steps as well as a lot of ultra-specific information about technical processes.
On the one hand, it will make you want to come up with inventive ideas and repair your car yourself. On the other hand, a lot of Maxham’s insights can be somewhat sobering.
The Art of Troubleshooting is certainly very sceptical about the popular notion that we can and should refurbish our cars ourselves. As its author suggests, this may in fact be a financially unsound perspective in many cases.
Maxham doesn’t beat around the bush when explaining this theory:
“The problem is, the manufacturer will always be better at putting together machines. That’s the whole point of their existence: to efficiently turn raw materials into finished products!”
One of the ways in which manufacturers or repair shops achieve their higher efficiency is by making use of specialisation and division of labour.
In a professional garage, everyone will have their area of expertise. One of the employee will perform a certain operation all day long. A second employee will perform another and so forth. And thanks to a rotation system, all employees will gradually build up know-how in all areas.
Contrast this to your situation at home: You will only rarely perform repairs at all, there will be few repetitions of the same issue and you’ll still have to be a veritable jack of all trades. What we’re saying is this: You’ll need to be really good at what you’re doing to be able to compete with the pros.
What’s more, a professional repair shop will be equipped a lot better, equipment-wise than your humble garage. As Maxham writes:
“Think about just a simple operation, like placing a tire on a car. Done by the side of a road, this involves a jack, a tire iron, and some grunting (or maybe that was swearing I heard…?). Done in a high-tech factory, the car is already off the ground, perhaps the wheel is automatically lifted into the perfect position with a crane, while the nuts are tightened down with a pneumatic wrench in a fraction of a second.”
So even if you are really good at this – you’re going to require a lot more time to get the job done.
There is a simple formula to estimate whether repairing your car yourself is a viable option:
Cost of Discovery + Cost to Fix < Cost of Equivalent Replacement
This may raise an eyebrow or two. What, exactly, is the ‘cost of discovery’? Very simply, it’s the time you invest to find out what’s causing the problems.
In some cases, this won’t take you very long. If the tyres are worn off, you simply replace them. If your engine starts misfiring regularly, you can be pretty sure it’s due to faulty spark plugs.
Other issues can be more complex, however.
For example, we’ve dedicated an entire blog posts to all the different kinds of car exhaust smoke colours. Finding out what they mean be a time-consuming and nerve-wrecking process.
Experience can obviously help a lot. Especially the generation of our mothers and fathers had to repair quite a lot, since there was usually no easy or affordable replacement. For most of us, however, a car is still very much a riddle wrapped up in a enigma. To even penetrate the outer shell of this riddle is going to cost time – something we all too often don’t have.
This is why Maxham suggest an intriguing strategy: if you’re uncertain about the causes for your malfunction and don’t have the time to systematically test potential solutions, why don’t you instead try different fixes at the same time? Some of them may feel ridiculous, others too obvious. If all goes well, however, one of them at least should do the trick.
The reason for the shotgun analogy is that it feels a lot like hunting: You shoot at your target by spraying it with many pellets at the same time to see what sticks. In the end, it doesn’t matter how you hit your target. What counts is that you did.
Shotgunning is a clever strategy to stand a chance against the accumulated experience and superior technology of professional garages. Still, it is not assured to be cheaper. After all, you will need to invest in many different parts, which may come in more expensive than just paying an engineer to take care of things.
Third party repairs tend to come with a warranty, too.
All in all, fixing things may look cool and make you feel more self-confident. In practise, however, it is unlikely to constitute a sensible strategy.
With that in mind, let’s now focus on our original topic: Repairing your car versus replacing it. Surely, there’s a breaking point, when the additional repairs become more expensive than investing into something new. And as we’ve mentioned, there are plenty of rules and suggestions about how to define that breaking point.
The probably easiest rule of all is this one:
If you no longer feel safe driving your car, it’s time to replace it.
As primitive as it sounds, this rule has been promoted by someone as prominent as Ron Montoya, senior consumer advice editor at price comparison site Edmunds.
Unfortunately, this hardly qualifies as a helpful instruction. For one, there may be various instances in the lifecycle of your car when you may not feel entirely safe. And rightly so: Worn out breaks are a reason to worry. So is a broken serpentine belt, which controls the alternator, water pump, power-steering pump, and air-conditioning compressor.
Just because these components are no longer working properly, however, you wouldn’t want to replace your car straight away. Bringing your vehicle in for a repair and maintenance can make it feel perfectly safe again – even with 200,000 miles on the odometer.
Unfortunately, this rule in no way answers that vital question: When is it no longer sensible to actually have your car repaired?
Let’s take a look at another often touted rule to see if it can help you make that decision.
The 50% of repair may be the most famous guideline to decide this question. Curiously, despite this fame, it is impossible to uncover who first came up with it. We’ve searched all over the web to find clues as to the origins of this rule. Amazingly, we couldn’t find the slightest hint.
It therefore seems likely that the 50% rule of repair is a rule of thumb which mechanics used to recommend either a repair or a replacement to their customers. It developed independently at different places and with different people and then gradually spilled over into the mainstream.
Here’s the simplest version of this rule:
“If repairs exceed 50 percent of the total cost of a replacing a piece of equipment, then you should go with replacement.”
This sounds reasonable. The closer the cost of a repair edges towards the cost of a replacement, the less attractive it becomes. Intuitively, 50% sounds like a sensible cut off mark. So, in case of a problem, should you simply stick to the 50% rule and end up a happier person?
For a rule so omnipresent as this one, it is remarkable that the 50% rule of repair has never really been empirically tested. Maybe that’s because it would be very hard to actually do that. On the other hand, the practical benefits of knowing for sure whether this constitutes a financially sound approach, are immense. So far, however, no one has even tried to seriously verify this hypothesis to our knowledge.
So, essentially, you’re going to have to take it on good faith. When it comes to large investments and complex repairs, that may not be a particularly good strategy.
Even if the 50% rule of repair had been tested and found to be correct, there remain plenty of practical problems. For these reasons, Maxham rejects the 50% rule as impractical. That may be a little too harsh in our opinion. But it does highlight that it’s not quite as perfect as some make it out to be.
Maxham’s critique mainly revolves around one fundamental principle of the rule: Finding a perfect replacement for your existing car. There is something to this. After all, what are you going to compare the repair costs to: The exact same model with the exact same mileage and the exact same condition? A comparable car from a different manufacturer? A new, entirely different car that you fancy? It is impossible to create a single gauge.
Also, your needs may have changed. So you might not actually want an identical replacement even if it were available. Instead, you might go for a better or cheaper option instead, distorting the comparison.
Things are further complicated if you consider that you’ll need to work out a sensible comparison price. This may not always be easy, since you’ll have to factor in plenty of variables, from the maintenance and insurance of the new car to its operating costs and the monthly loan payments.
What exactly does the rule mean when it speaks about the costs of a replacement? The purchase price? The total costs? And over which period of time?
Without finding replies to these questions, the rule becomes useless. It is therefore perhaps best to regard the 50% rule as what it started out as: A rough rule of thumb to give you a rough indication of what to look out for. Without further reflections, however, it is unlikely to lead to a concrete decision.
Despite its shortcomings, the 50% rule of repair continues to attract its disciples. In fact, it is still by far the most widely quoted and recommended advice for those wondering whether to replace or repair their car.
This has lead some experts to come up with their own, slightly adjusted spins on the original idea of the rule.
One of the more interesting variations is a solution proposed by car site Edmunds and the American Consumer Reports:
“When repair costs start to exceed the vehicle’s value or one year’s worth of monthly payments on a replacement, it’s time to break up with your car.”
You can see how this recommendation is similar to the original concept of the 50% rule. Both look at things from the perspective of your costs. Are you going to spend the money on repairing and keeping your current mode of transportation? Or are you going to invest in a new one?
The rule set up by Edmunds and Consumer Reports makes things a little more practical. You still need to decide what to compare the repair costs to. But once you’ve done that, all that remains to do is to calculate the monthly costs for a new car and you’re done.
This is actually pretty easy. You can do this by using our free online car loan calculator, for example. This allows you to play with different configurations of interest rate, loan term and downpayment to arrive the solution that’s best for you.
That said, this rule is also arbitrary to a degree. Why should you look at a one year horizon? If you’re pretty sure your current car will work just fine for at least a couple of years after you’ve had it serviced, it may actually pay off to perform the repair.
Also, just like the 50% rule, this recommendation does not take into account your personal financial status. This is why we personally feel the next suggestion in our analyses, the 1/10th rule, is a lot better.
For lack of a decent solution, various experts and semi-experts around the world have tried to come up with alternatives. One of the most noteworthy of these experts is Sam Dogen, aka The Financial Samurai.
Contrary to some more or less unskilled commentators, you actually have to take Dogen seriously. His personal CV reveals a life dedicated to finance. He has enjoyed personal triumphs and weathered existential crises. He has worked according to the book and developed inventive new strategies. Most of all, he has laid his ideas open for the public and learned from discussing them with his growing community of followers.
This is why you should consider his take on the repair/replace your car question, even though Dogen is not actually a car expert.
Here is what he proposes:
“Spend no more than 1/10th your gross annual income on the purchase price of a car. If you make the median per capita income of ~$42,000 a year, limit your vehicle purchase price to $4,200 if you must buy one. Absolutely do not go and spend the median car price of $34,000!”
What you’ll notice straight away is that there is one decisive difference between the 50% rule and the 1/10th rule. Whereas the former looks at the cost of the repair, the latter focuses on your personal finances. This means it
a) is a lot easier to apply in practise
b) takes your personal financial situation into account.
Working with this rule is tremendously straightforward. And whereas the 50% rule seems to be pretty random in its conception, the 1/10th rule actually refers to other, time-proven concepts.
One of these concepts is the 50/20/30 rule of budgeting. Since this is actually a helpful approach to setting an overall budget, let’s take a quick look at it to evaluate the proposition by the Financial Samurai a little deeper.
The idea behind this rule is to give you a rough idea what a healthy budget should look like.
According to its proponents, you should dedicate
Although you can argue about the exact numbers, this concept sounds quite reasonable. By restricting your financial obligations to 20%, you can reduce your risk significantly. And limiting 30% of your income to non-essentials is a good compromise between saving a nestegg and still enjoying your money.
The 1/10th rule was clearly created with the same basic considerations in mind.
For many households, a car is an essential expense. It provides transportation to work, for example, or for taking your kids to school. It can also save you money if you use it to get to your holiday destination.
A car also creates a financial obligation. Unless you pay for it in cash, you’re going to be saddled with a loan for a while.
By restricting the purchasing price of your car to 1/10th of your total income, you can fit it into your 50/20/30 budget while still leaving enough leeway for additional expenses or unexpected problems.
The great thing is that both rules can potentially work for anyone. Even if your total income per month is fairly low, you can stil stick to these numbers and make them work for you.
Before we give you a few more practical suggestions about how to repair your car, here’s a final rule which deserves your attention.
Say that again?
We promise, this will be the last complicated formula we’ll use in this article. But it’s an important one, so allow us to explain.
When you have a repair done on a car, you often think of it as raising its value. In most cases, this will actually be the case. It is, however, by no means a given.
Sometimes, the only think a repair does is restore the car to its average resale value. If you own a ten year old Toyota Corolla and the motor breaks down, equipping it with a £700 new motor is unlikely to make it £700 more valuable. In fact, all it is probably going to do is make it as valuable as a regular ten year old Toyota Corolla.
This adds another layer to your considerations: When pondering whether to repair your car, you also need to take into account what that investment will get you.
If you perform a repair that costs you £500 and only raises the value of the car by £100, then you’ll have made a loss of £400. In case of our example with that ten year old Corolla, you may even have made a £700 loss, since that repair did not actually make the car any easier to sell. In fact, if you’re putting in a non-OEM engine, it may even hurt the sales price of your model.
That’s what that complicated formula is expressing:
The value of the car after the repair (mpost-repair) minus the value of the car as it is (msalvage) should lead to a positive balance (rvalue-added).
Those £700 are hands-on money that you could have spent on a used car to replace your current one. So, the higher this amount, the more attractive a replacement becomes.
On the positive flipside, of course, this also means that you can actually be in a position where a repair significantly improves your resale value. Just to give you a very easy example from the top of our heads: You can find used front seats at many junkyards. Some of these will look as new, greatly improve on your current ones and come at a reasonable price. Adding a pair of these can actually raise the value of your car by a lot more than what you paid for them.
All in all, this is a very clever approach, because it makes it clear that not all repairs are created equal. With some, not only are you spending a lot of money on the actual repair, you are also losing money in terms of the relation between investment and return. With others, you are actually making money.
Whatever rule you choose to decide on whether to replace or repair your car, these are considerations which should go through your mind.
Right at the beginning of this article, we basically stated that it might be smarter to leave the repair part of things to the pros. Now, let’s backtrack from that statement a bit. Yes, when it comes to complicated repairs, the specialisation and expertise of a mechanic will certainly tell. On the other hand, there are quite a few basic procedures that you can easily take care of yourself.
In some cases, these will actually improve the value of your car far beyond what you invested.
Let’s take a look at these steps and how they can make a repair seem like a better option than a replacement.
Some of the procedures below won’t even qualify as repairs. Perhaps, they’re better categorised as maintenance. Still, they’re easy to perform, usually don’t take up a lot of time and can significantly improve the life expectancy of your car.
After you’ve taken care of these small, easy to perform routines, it is now time to shake things up a bit. The following are repairs which require a few steps more. What they do not require is deep expert knowledge.
And if you can actually pull them off, you can save some serious money.
Finally, let’s take a look at some of the best online repair channels out there. Not all of them are suitable for beginners. They all include useful information regardless of your level of expertise, however.
And there you have it: All the rules and recommendations you ever needed to know for deciding whether to repair or replace your old car.
Now, it’s time to crunch some numbers and find out your best strategy. Should you end up needing a car, don’t despair: At CCC, we have a wide selection of great used cars. And thanks to our forward thinking approach to financing, you will even be able to find a solution if you have bad credit.
Just visit our digital showroom or drop by our Manchester store. We’re looking forward to helping you!
7 January 2019 Concept Car