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Dave Says: Fix It or Sell It?

Dave Ramsey - September 04, 2012

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What's your advice on when to fix an old car versus sell it and get a new one?

Dear Dave,

My old car has been having lots of problems lately. Do you have any advice on how to decide when it’s best to just fix an old car or get a newer one instead?

Kristin

Dear Kristin,

This is a good question! Mathematically, the first thing to look at is the car’s worth if you don’t make repairs. Should you spend $1,000 to increase the value of the vehicle $500? Dumb question, right? At that point, you sell the car as-is and put the $1,000 it would take to fix it toward something newer.

\On the other hand, let’s say you’ve got a little hooptie worth $1,000 but by putting $500 into it, you can have it up and running again. Suddenly it’s worth $2,500. That’s money well-spent, because what you’ve done has significantly increased the value.

The other side is that at some point, the hassle factor of an old car can turn it into a money pit. If you can’t get anywhere because the car’s always busted, then you need to find something else for the sake of safety and reliability. If this happens, though, you should still pay cash for a better car. Even if you’re not taking a step up in price or fanciness, it’s still better than taking on a car payment. I’d walk or ride a bike everywhere before I did that!

—Dave

For more financial advice, please visit daveramsey.com.

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