Since the onset of the COVID-19 pandemic, more than 26 million Americans have filed for unemployment. What’s more, according to the International Labour Organization, 1.6 billion workers – nearly half of the global workforce – are at risk of losing their livelihoods.
Because of this grim economic outlook and sheer sense of uncertainty, most of the population is trying to save money. Yet we live in an era where people toss out salvageable items when it’s easier to buy something new.
You can save money by defying the norm and fixing what you already have. For example, one big-ticket item that you might consider repairing, rather than replacing, is your vehicle.
If you can avoid an auto loan by keeping your current car running, it’s almost a guarantee that you’ll save money.
Why So Many People Choose to Buy a New Car – Even When They Can’t Afford One
For most American families, transportation is the second-largest expense following housing. Too many people overspend on their car to the point that they can’t pay down their debt. It makes you wonder: Why are consumers willing to spend so much on a new vehicle?
The most common answer people give is that they simply get bored with their old car and want something new. Clearly, that reasoning has nothing to do with financial stability and everything to do with wanting to have “the next big thing.”
Other people decide to purchase a new vehicle because their existing car is high-mileage. But since many modern cars can easily surpass the 200,000-mile mark, there’s no reason to discard a vehicle just because it’s high mileage. So, that reasoning doesn’t hold up, either.
Also, many people choose to buy a new car because their existing vehicle needs repair. While that argument makes sense, it’s only valid to a certain extent.
The Argument for Fixing Your Existing Car, Minimizing Debt and Saving Money
Americans borrow, on average, $32,480 for a new vehicle. That loan saddles them with a car payment of $550 per month. As a result, consumers across the country owe approximately $1.2 trillion in auto loans.
And that kind of debt can put you in a tough spot, especially during unforeseen hardships, such as the COVID-19 pandemic.
The good news is, you can avoid auto loan debt by fixing the car you already have. Consumer Reports estimates that, on average, a 10-year-old vehicle costs $458 per year in maintenance and repairs. That figure is less than the cost of one payment on a typical new vehicle. An average 5-year-old car costs even less to maintain – just $200 annually.
Presumably, the statistics from Consumer Reports focus on individuals who take their vehicle in for professional service. DIYers who tackle their own maintenance and repair are likely to spend far less on upkeep.
Regardless of whether you take your car in for repair or fix it yourself, maintaining your current vehicle is almost always cheaper than buying a new one. Even a car that’s completely “dead” shouldn’t force you to take out a massive auto loan.
What to Do When Your Current Vehicle “Dies”
Everything wears out eventually – including costly components inside your vehicle. When large assemblies, such as the engine and transmission, fail, the cost of repairs might exceed the value of the vehicle.
But that doesn’t mean you have to run out and buy a brand-new car. Phil Reed, NerdWallet’s car-buying expert, recommends purchasing a used vehicle that’s one or two years old. These newer pre-owned vehicles offer next-to-new reliability without the depreciation costs.
Other experts admit that even a 10-year old used car can be reliable. Autotrader, for example, says it’s possible to find a dependable decade-old vehicle – you just have to be cautious and take your time. The website recommends getting a professional pre-purchase inspection and looking for an extra-clean car with lower miles.
Avoiding an Auto Loan is Particularly Beneficial for DIYers
For DIYers, forgoing an auto loan should be an obvious choice. As we’ve established, fixing your existing car, rather than buying a new one, can save you a lot of money. Plus, when you repair something yourself, you earn a sense of accomplishment that you can’t get from whipping out your wallet.
When the time comes for a replacement vehicle, a clean used car that’s 10 or 15 years old is a great prospect for a DIYer. Vehicles of this vintage might need some upkeep but in many cases, major assemblies (e.g., the engine and transmission) are still in good condition.
Generally, vehicles became much more reliable starting in 1996 with the introduction of onboard diagnostics (OBD-II). There are still plenty of cars from the late 90s and early 2000s on the road, though it may take a little extra elbow grease to keep them running.
Take Care of What You Already Have
It all comes down to taking care of what you already have. Despite living in a throw-away society, you can think outside the box and resist buying a new car (or a new phone, toaster – whatever). Doing so will leave you with a larger nest egg. And that can come in handy in the event of an emergency situation, such as the COVID-19 pandemic.