I think the title says it all. If not, I think this picture does. My car just surpassed 190,000. This isn’t a Honda or Toyota. This is a 1999 Ford Escort. It’s been surprisingly reliable, but I feel that it’s only a matter of time before I encounter a problem I’m not willing to pay to fix. That means I’m at a crossroads: I can either decide to wait until a problem arises that is going to be too costly to fix, or I can be pro-active and sell my car in its current condition to buy a new one.
Option 1: Wait for car to die
I think it’s safe to assume that my car will need a major repair in the next 1 to 2 years that will “total” it (i.e. the repair costs more than it’s worth). For ease of comparison, I’ll assume my car lasts 18 months and then needs one of these repairs. If my car gets to that point, it will be worth about $200 to a junk yard. That means it will basically cost me $1k/yr in depreciation (no other car expenses factored in).
Option 2: Sell car now and purchase a new/used car
Kelly Blue Book says that my car, in its current condition and mileage, is worth about $1,750. This looks to be about on-par with what Craigslist in my area reveals. If I were to look at cars under $10k I could swap cars for about $9k out of pocket after taxes and selling my car. While I do think that new $20k cars provide a better long-term value right now than used $10k cars due to the high prices in the used car market, a used car would help a lot more with my cash flow over the next few years. Because I have a a few high expenses in my near future (wedding next summer, house in 3-5 years), I need to preserve my cash flow when I can.
There are many used cars that I could get that would cost me about $1k in depreciation per year to own. By upgrading my car before it dies, I could be driving a nicer/newer car without much added expense. I think that upgrading before my car dies makes the most sense to me at this point. I’ve been wanting a new car for a long time. Oh, and I didn’t even factor in all the extra time I would gain. I’ve been looking at used cars for the past 1.5 years, with many periods where I thought I would buy and then didn’t. Getting a newer car would decrease the amount of time I waste looking at cars and lead to more life enjoyment. Guess it’s time to brush up on my Craigslist car selling skills.