Tuesday, March 24, 2009

Keep that Car or New?

As the economy continues to struggle forward, people are starting to keep their older cars on the road. Not only that, people are spending less on luxury items and big purchases such as HDTV's. If you own a car and have no payments left on it, it makes sense to keep it a while longer during the recession. Not only do you save money on payments but also insurance is lower than compared with a new vehicle.

Huge inventories of new cars are still sitting in abandoned but secure parking lots across north america; an ominious signal pointing to the eventual collapse of the north american auto manufacturer.The auto manufacturers are trying hard to get people to buy by offering "insurance" in case they lose their jobs - you can return the car within a year if you lose your job. At first it sounds great but there are limits and you need to read the fine print; often these documents come with fine limitations and it could ruin your credit score.

But when do you know if repairs on a used car are going beyond the point of return? If the car is 6 or more years old and major items are starting to degrade:

- Engine, transmission, body/frame work, or any repair that exceeds 33% of the car's actual value

I had an old 1992 F150 truck years ago that required transmission work. That cost $1,075 dollars. The truck was worth $4,000 dollars. Immediately after getting the repairs I sold the truck and leased a new car. My gas consumption went down from $10 per day to $2 and I never had any big issues with the new car.

Before that I had an old 1984 Chevy Custom Deluxe truck which required extensive work on the clutch (2), transmission (2), brakes, etc over the course of 7 years. Reliability of 80's vehicles was something that never happened.

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