Is It More Echonomical To Fix An Old Car Or Get A New Carby matt on August 7, 2006
Q: I own a 2000 Grand Caravan with a 3.3 engine, with 172,000 miles. Right now I need a new flex plate, $700. Last month I spent nearly $1000 on repairs. The transmission has not gone bad (yet). The A/C is making some noise. There is a possible axle/bearing issue developing. I can pay for a new van or I can pay to have this fixed. The question is; economically should I spend for these repairs or bite the bullet and get a new van for $18,000. I drive a lot and in 6 years would probably be over 100,000 on a new one. What to do?
A: The answer to your question is going to be in the math. I went to Kelley Blue Book and it seems your minivan is worth about $2,000.00 on trade. You could possibly get a little more if you sold it out right but it depends on what time frame you are looking at. The new minivan you are looking at would cost $18,000.00. If you do not put any other money down you are looking to finance $16,000.00.
I then went to BankRate.com auto loan calculator and put in this the loan amount of $16,000.00 plus the term of 48 months (4 years) and the interest rate of 7%, which I found by searching their site for an average car loan rate. If you search around and if you have good credit you can probably get better but with the way interest rates are going there is a better chance that interest rates on care loans will go up and not down. If you could find a low interest rate from the dealer because they want to move the van that would be your best bet. For example I went with my nephew shopping for a car and we were able to get a 2.0% interest rate on his car because they had a deal with a bank so they could move more cars. So just keep your eyes open for that.
It turns out with a $16,000.00 loan on a car at 7% for 4 years you are looking at $383.00 a month. If you could get that down to $14,000.00 that you finance then you are looking at $335.00. Now lets take into account what you have spent on your car over the last few months, which is $1,700.00. At the $383.00 a month rate you just made 4.4 payments on the new car with little to no money out of your pocket besides this month. At the $335 monthly payment you just made 5 payments on a new car.
With the math we provided you should be able to figure out how much you have spent on the minivan over the last 6 months. If you have spent more to fix the old minivan than you would have on payments for a new minivan then, mathematically, it will costs you less money to get a new minivan.
Good luck with your decision. We hope this math has helped you out.