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My transmission needs to be rebuilt, but my vehicle is not worth very much. Should I rebuild the transmission or replace the vehicle?
When confronted with the possibility of a major repair on an older vehicle, many people decide to buy or lease a new vehicle to escape the cost of the repair. If you do not like your current vehicle, a new vehicle is something to consider. But, is buying or leasing a new vehicle a financially sound decision? In most cases the answer to that question is no.
Motor vehicles are built to last a lot longer today than you might think. For example, a regularly maintained Honda can last 500,000 miles. So, with the high costs of new vehicles it is usually better to invest in an existing vehicle, even if repair costs exceed the value of the vehicle.
Also, with 12 month interest free financing provided by Wells Fargo Financial, repair costs can be deferred.
The table below compares the 3 year financial outlays of repairing a 1997 Honda Accord versus buying or leasing a new 2005 Honda Accord. Repairing your existing vehicle is significantly more cost effective, but we recommend doing the research for your own vehicle using the following spreadsheet cost estimate.xls.
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Repair 1997 Honda Accord |
Purchase 2005 Honda Accord |
Lease 2005 Honda Accord |
| Down Payment |
NA |
3,000.00 |
3,000.00 |
| Sales Tax |
0.00 |
2,264.15 |
0.00 |
| Title and Registration Fees |
193.50 |
386.00 |
386.00 |
| Insurance |
2,306.00 |
2,077.00 |
2,170.00 |
| Maintenance/Repairs |
6,000.00 |
1,000.00 |
1,000.00 |
| Interest Expense* |
NA |
2,289.82 |
NA |
| Lease Payments** |
NA |
NA |
13,550.13 |
|
Lease Acquisition Fee |
NA |
NA |
500.00 |
| Principal Payments |
NA |
22,729 |
NA |
| |
|
|
|
| Total Cash Outlay |
$8,499.00 |
$33,745.97 |
$20,606.13 |
| |
|
|
|
| Less Equity after 3 years |
3,975.00 |
13,683.00 |
0.00 |
| Less Trade In Value |
0.00 |
200.00 |
200.00 |
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|
|
|
| Net 3 Year Outlay |
$4,524.50 |
$19,862.97 |
$20,406.13 |
* Financing based on 6.34% interest rate and 36 month term
** Lease based on 6.24% interest rate, 36 month term, $13,683 residual value and an 8.8% sales tax rate
Insurance estimated by www.esurance.com. New vehicle estimates were found at www.edmunds.com. Used car estimates were found at www.kbb.com.
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