I currently have a 2007 Pontiac G6 with 86,000 miles on it. According to CarFax, it is worth $2,130. It has begun to leak oil and I have had it looked at by a mechanic. The mechanic informed me that because of the location of the leak, they would have to remove the power steering rack to fix it. The cost of this would be approximately $1,700. I understand that what I would spend to fix the oil leak is over half of what the car is worth, but I can’t seem to find a reason to spend approximately $17,000 on a used car (I know I want a Toyota Camry with under 40,000 miles on it), nor can I afford a car payment right now, rather than spending $1,700. I had an oil leak problem roughly 5 years ago and had to get a new oil pan. If I spend $1,700 to fix my oil leak problem now, I can buy some more time (hopefully at least 2 more years, if not more) until I would be able to afford a used car. What would you do in this situation? Please advise.
I’ll be the first to admit that I love cars, but in the last few years, my view on them has changed considerably. 10 years ago I would have used this type of situation to justify going out and buying a new car. Fast forward to today and my perspective is markedly different. A car’s primary job is to get you from Point A to Point B safely and reliably. The rest is just details and personal preference.
With that being said, you do have a bit of a decision to make. It can be disconcerting when you see that a repair is going to cost nearly as much as your car is worth. However, there are other things to consider. What is the overall health of your car? In other words, do you anticipate other major repairs will be needed soon? Will this specific repair add enough time to the expected lifespan of my car to make it worth it (which it sounds like it will in your case)? Can you get the repair done less expensively somewhere else? You should ask yourself all of these questions before making a decision.
Based on the information you shared, I’d absolutely repair the car and continue driving it until you’re faced with another reason to consider making an upgrade.
But wait, there’s more! Assuming you make the repair and are able to continue driving the car for years to come, you’ll still inevitably have to replace it. This repair is buying you time to prepare for just that occasion. I know you said that you can’t afford a new car payment right now, and that’s fine. What I will encourage you to do sooner rather than later is to start setting aside money each month for your future new ride.
Let’s use your $17,000 Toyota Camry for this example. If you had to finance the whole thing, you could expect to pay around $300 a month for 5 years assuming you have decent credit. If you are able to get another 2 years of service from your Pontiac while saving an average of $150 a month for those 24 months, you’d have a down payment of $3,600 (plus whatever you could get for your car). This means you’d finance around $13,400 for the Camry, lowering your monthly payment to about $240 a month. Even better, you’ve got at least $150 a month already available in your budget because you’ve been preparing for this day by saving each month.
If you can’t save $150 a month right now, here’s another method you might consider. Start by saving $10 this month and then try to increase the amount by $10 each month for the next two years. Bit by bit and month by month you would wind up with $3,000 saved for a down payment, but $240 a month already available in your budget for a new car payment at the end of 24 months.
However you choose to approach your future car purchase, Lori, is up to you. Make sure you’re being proactive about what you already know is coming, though, in order to be able to drive off into the sunset with things under control.
Damian is the lead Financial Concierge on Your Money Line, the financial help line serving all Pete the Planner® Financial Wellness clients. Damian is a CERTIFIED FINANCIAL PLANNER™ professional and loves answering your money questions. Despite sharing a last name and sense of humor, Damian and Pete are not related.