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I saw a post today from a facebook friend who said he has a truck with 104,000 miles, drives hundreds of miles per week, and is considering replacing it with a “new” used vehicle with 60,000 miles. He would be paying $29,000 for the new truck, and get $18,000 in trade in for his “old” truck. Purpose, he says, is that he is concerned about the transmission or engine dying on him on the “old” truck, which would be very expensive to fix. He was asking for advice.

 

My advice was…keep your old truck. You’re paying $11,000 to mitigate a potential (and not even likely) failure of your engine or transmission. Just going by the math here, it’s not a good bet….104,000 is not necessarily an “old” vehicle in any way (particularly for a good truck, which can easily go 200,000 or 300,000 miles)….and the likelihood of having engine or transmission die on you in the next 44,000 miles (when the “new” vehicle will also have 104,000 miles and you’re back to square one) is miminal, all for the cost of $11,000. Said simply, you are FOR SURE losing $11,00o in order to prevent a POSSIBLE loss of $5,000 to $10,000 if the “old” truck craps out. You’re buying an $11,000 insurance policy, that is WAY overpriced for the risk.

 

So now gets to a general principle of Todd the Finance Guy. Cars are nothing more than transportation. Four wheels and a steering wheel, oh, and an engine and tranny. New cars are cool, but very soon, they are not new cars any more and back to boring. So, the most logical financial decision for a car is….buy only used cars, that are a couple years old (when depreciation is maximum but they are still relatively “new”) and keep that sucker and drive it until the steering wheel vaporizes. It is almost ALWAYS (there are exceptions to every rule, of course) cheaper to fix an old car, than to trade it in/sell it and buy a newer car.

 

Of course, there is a point where a car simply becomes unreliable because it is so old, that you don’t want to get stranded in the desert or have it in the shop every other week, even if it still probably makes financial $/c sense to keep repairing it. You’ll know when that comes. For me, for example, my first car was a 1982 Nissan Sentra. Now theoretically, I could still be driving that today, but that probably wouldn’t have been the best move.

 

Or, you may just want to get a newer car, because you’re tired of the old car…certainly I would have reached that point with my 1982 Nissan Sentra. At least by 1995, I would have decided, enough with the crappy sentra already. I was not a wise Todd the Finance Guy at the time, because I actually bought a used Honda CRX in in like 1987, selling my Nissan Sentra WAY too early. But I digress.

 

Ultimately, if you want to get a newer car because you want it,,and you can afford it….fine, go for it. But don’t pretend or delude yourself that you’re doing it to “avoid repair costs.”

 

The finance guy maxim – keep your old car as long as possible…and be a wise finance guy.