How Much Money Should You Dump Into Your Car Before Getting a New Auto Loan?

when is the best time to buy a new carDeciding when to finally part ways with your college beater or the car that has transported your kids to soccer games and dance recitals for years can be difficult.

However, when continuous car maintenance costs pile up each year, holding onto a vehicle’s sentimental value can cost you thousands of dollars. Knowing when to let go of your old car and go ahead and buy a new one is necessary to ensure you’re saving money on annual transportation costs.

The easy route to take when faced with such a conundrum is to throw your hands up and trade-in your auto repair nightmares for a new auto loan. Unfortunately, not everyone has the financial luxury to make such an impulsive decision. Instead, you’d likely schedule an appointment with your mechanic and allow your finances to take a temporary beating from car maintenance costs. But you can reasonably allow your bank account to take such a lashing for only so long.

So when is the best time to buy a new car? Recognizing the right time requires knowing how much a new auto loan will cost you at the end of the day.

Cost of a New Auto Loan

Using the potential cost of a new auto loan can help you establish your own personal cut-off point when it comes to recurring auto repair bills. According to USA Today, the average cost of a new car in 2013 was $31,252. Additionally, the national average auto loan rate in 2013 stood at 3.71% APR for a 60-month term. When plugged into an auto loan calculator, this amounts to monthly payments of $571.47 — or $3,036.20 in interest rate charges alone.

These figures are significant enough to make even the most troubled used car owner balk at buying a new car, especially when a new car depreciates 20 percent straight off the dealership lot, according to Despite the enormous cost a new auto loan brings, pouring money into constant car repairs for a depreciating vehicle isn’t always the wisest choice either.

Related: 5 Things You Didn’t Know About New Car Loan Rates

When is the Best Time to Buy a New Car?

So what is the sweet-spot that can flag you on when is the best time to buy a new car? It ultimately depends on whether you can actually afford to make payments toward a brand new car, without letting your other obligations go by the wayside. Although, there are a few indications that you can easily identify to help you determine if it’s time to clock-out your old ride for good.

Annual Car Maintenance Costs Skyrocket

When it comes to how much money you should put into auto repair issues, there’s no hard and fast rule. However, if car maintenance costs are greater than 50 percent of your car’s present value, you might be better off purchasing a more reliable used car, or if your finances permit, searching the best car deals locally for an affordable new car.

Before Next Big Auto Repair Service is Needed

Most vehicles undergo routine and expected auto repair and maintenance cycles, which can be found in your car’s manual. For example, some vehicles require a timing belt change every 60,000 miles. If you’ve determined that your car maintenance costs have teetered over the car’s 50 percent valuation mark, try timing the sale of your car to a few months before the next scheduled maintenance repair is due and allow the car’s prospective buyer to take on the task of paying for parts and labor themselves.

Related: The Dos and Don’ts of Paying off Your Auto Loan Early

Safety Becomes an Issue

It’s one thing to be financially savvy and another to insist on staying frugal at the expense of your bodily safety and that of your passengers. If your auto repair issues are so detrimental that they make your car a ticking time bomb waiting to cause an accident or injury, that is a major indication to let it go and find yourself a reliable car with airbags and seat belts intact.

And, don’t forget the power of DIY: Check out a few basic car maintenance tips that will save you money. 

Should You Give Up Auto Repair Expenses and Buy New?

At the end of the day, you’ll have to decide whether it’s time to stop paying for auto repair, and instead, pay for a new auto loan that allows you to enjoy the comforts of a newer, more reliable car. Factors that contribute to knowing when is the best time to buy a new car differ for everyone. For instance, a forum comment on motor oil website, Bob is the Oil Guy, shares the option of one user on the topic of when your car has become a money-pit.

Forum member, kb01, wrote, “A paid off car, with a known maintenance history has a certain inherent value in itself. For me, the [Kelley Blue Book value] is a minor consideration. When trying to justify a repair, I try to factor in the cost of likely repairs within the next few years, major maintenance items (new tires, timing belt, etc.), my own comfort level of an unexpected breakdown, and frankly, how much I like the car.”

Photo credit: comedy_nose

  • Shane @

    I look at it as a cost comparison between the cost of the new car loan and the repair. If I can afford a new (to me) car loan payment, over say 3 years, will the repair be paid off in a few months vs. that three year term?

  • Its simple !! Do not buy a new car that will cost you up to 5,000.00 as soon as you drive it off the lot. Buy a year old program car that’s still under warranty. Save several thousands and use part of your savings to buy an extended warranty and you have a car that someone else has paid for the biggest value loss the car will take. Its a smart choice unless you have money to blow.