You've got your eyes on a fancy new ride, but your old clunker is still running and relatively reliable. Should you upgrade? When to buy a new car.

Some people like to buy a brand-new car every few years, even if the old one isn’t that old and runs perfectly well. Others are new car-phobic, and would love it if they never had to buy a new car. So how do you know when it’s time to buy a new car?

It’s easy enough to talk yourself into buying a new car. This is even more true in the current era of very low interest rates on auto loans and no-down-payment offers. For some people, it’s time to buy a new car any time they have to make more than two or three repairs in one year. Attractive financing arrangements only make the idea more appealing.

But is that really a good reason to buy a new car? Let’s consider some factors that should be analyzed before you make a decision. After all, a new car is an expensive proposition. It’s also one of those quiet expenses, that can drain your savings and run up your credit limits in a hurry. For that reason, the decision to buy a new car should never be taken lightly.

The repair bills on your current car are bleeding you

Repair bills for cars are inevitable, even on late model vehicles. But as cars age, they require more frequent and more expensive repairs. It’s hard to know when to buy a new car because so much is dependent on individual circumstances.

You might adopt a rule of thumb. For example, let’s say that you project that a new car will require a $400 monthly payment. 12 months of payments are equal to $4,800 per year. You can use that as a barometer of annual repair expenses on your current car.

If you have, say, three repairs on your car during the year at a total cost of $1,500, you might decide that—based on the car payment barometer—it’s worth keeping your old car. If, on the other hand, you have five repairs at a cost of $3,500, you might decide that it’s close enough to the cost of the payments on a new car to make buying a new car worth it.

But there are other situations where the type of repairs might also be a factor.

For example, let’s say that your 10-year-old car needs a new transmission, at a cost of $2,500. That’s a big cost, but it also will replace a major component in your car. By doing so, you may decide that the car has a “new lease on life,” and decide to keep it a few years longer.

In addition, when you make that kind of new investment in your old car, you might want to recover some of the cost by keeping the car longer. This will be especially true if the car is reliable, and doesn’t require ongoing repairs.

Still another repair-related factor is your own ability. If you are adept at repairing cars, holding onto an older car longer will be less expensive to do. On the other hand, if you know nothing about auto mechanics, and must go to a repair shop for all repairs, the cost is can be much higher.

Related: How Much Does It Really Cost To Own Your Car? You’ll Be Amazed

The car experiences too much down time

This is related to car repairs, but in a different direction. It may not be so much that your actual cost of repairs is overwhelming. It may be that the car simply breaks down too frequently, and spends an inordinate amount of time in the shop. That can force you to rely on rental cars, other drivers, or even to go car-less more frequently than is practical.

For example, it may be possible that you only spend $1,500 per year to repair your 12-year-old car. That’s a lot more affordable than purchasing a new car with a monthly payment. But the amount of money spent is the result of, say, seven or eight breakdowns that forced you to go without a car for a total of 30 days during the past year. You may decide that the car may no longer be worth keeping.

Cost is always a factor in determining whether or not to keep your current car, or to trade it in for a new one. But reliability is equally important. It will do you little good if you are saving money driving an older car, but you lose access to it on a regular and predictable basis.

You need a car with updated equipment

The reliability of cars has improved dramatically in recent decades. Even though it isn’t a cultural norm in America to do so, it is possible to drive the same care for 15 to 20 years. However, because of improvements in technology, an older vehicle may simply not have the type of equipment that you need or want.

Safety features are a good example. If you have an older car, and it doesn’t have airbags, antilock brakes, a backup camera or forward collision warning capability, that may be a compelling reason to trade up to a new car. This is especially true if you have young children, and want an extra margin of safety.

Apart from safety, it may also be important for you to upgrade the technological capabilities of your vehicle. For example, you may decide that you need built-in navigation, Bluetooth phone connection capabilities, and a USB port for plugging in a phone. This will be even more important if such amenities are needed in your line of work.

The car no longer fits your lifestyle

This is one of the biggest reasons why people buy new cars. If you have a change in lifestyle, your old car may not work for you any longer. For example, if you own a fuel-efficient subcompact from your single days, but you are now married with young children, you probably have a strong need for a larger car.

A change in occupation could also require a new car. For example, if you have an older car that is perfect for daily commuting, but you are now self-employed and need a vehicle with lots of storage space, you may need to trade in the car for an SUV or a pickup truck.

Conversely, if you move from a rural area or the suburbs, to an urban neighborhood, the SUV or pickup truck that you currently own may not be practical in an area where streets are narrow, and parking is very limited.

There are all kinds of lifestyle changes that could signal that it’s time for you to trade in whatever you’re driving now for a vehicle that’s more consistent with the life that you’re now living.

You can afford it comfortably

A lot of people are in car situations like the ones described above, but they are unable to purchase new vehicles because they lack the financial resources to do it. We all have to live within our means, so whatever state your current driving situation is, you can only make a change if you can afford to do so.

If you purchased a very modest car early in life, when your financial resources were very tight, you can certainly consider buying a new car if your finances have improved since.

Make sure that if you do purchase a new car, that you can afford to do it comfortably. It’s not just the monthly payment that you need to be able to pay, but also the higher cost of car insurance, and if you live in a state that charges them, ad valorem taxes.

Those expenses are closely correlated the value of the vehicle. This is particularly true of car insurance, since you will need to carry collision and comprehensive coverage on any new vehicle, in addition to basic liability insurance. That alone can raise the cost of a new car by hundreds of dollars per year.

Summary

Purchasing a new car is a major life decision, and shouldn’t be made lightly. Be sure to consider your lifestyle, your needs, and, mostly importantly, your finances, before taking the leap.

How do you decide when it’s time to buy a new car?

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About the author

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Since 2009, Kevin Mercadante has been sharing his journey from a washed-up mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed “slash worker” – accountant/blogger/freelance web content writer – on Out of Your Rut.com. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides “Alt-retirement strategies” for the vast majority who won’t retire to the beach as millionaires. He also frequently discusses the big-picture trends that are putting the squeeze on the bottom 90%, offering work-arounds and expense cutting tips to help readers carve out more money to save in their budgets – a.k.a., breaking the “savings barrier” and transitioning from debtor to saver. He’s a regular contributor/staff writer for as many as a dozen financial blogs and websites, including Money Under 30, Investor Junkie and The Dough Roller.