Tuesday, October 2, 2007

When should you get rid of your car?

No Credit Needed has a problem that made me think a lot about our relationship with automobiles. In this specific case, a transmission may need replacing - among other things - at a tune of $2,000 on a 7 year old van with 135k miles.

Some of the comments from his readers made me pause. A good many of them considered such a car to be unreliable, and the solution to be to buy a newer one. Here is a van that probably cost $25,000 new, and 7 years later it is unreliable and needs replacing? The math doesn't work well in my head. Over $3,500 a year for transportation. We must be out of our minds to buy these things!

When the automobile was invented, an owner of such a machine could take it apart and put it back together again. They took time to learn how it operated and how to fix it. Today most people can't even change a tire (and not the actual tire on the rim, just bolting it to the shaft!).

This is a recipe for utter disaster. An expensive machine, bought on credit, constantly depreciating, needing more maintenance as it gets older, without any knowledge of it beyond how to operate its controls in the most basic way, and utterly reliant on an industry (mechanics) that benefit from mechanical failures and lack of consumer education.

Now a repair is due...yet when we consider whether to go forward we do not think of how much we paid for it, $25,000, we think of what it is worth now, say $8,000. A $2,000 car repair looks huge. Yet this is something that cost us $25k, needing a repair of a mere 8% of it.

Somewhere along the line we forget how much we paid (probably because we never wrote a check, we just made little payments), and its value is judged not by what it is worth to us, but what it is worth to everyone else. This leads us to terrible financial decisions, like trading in a vehicle for chump change (market value) simply because it needs an expensive repair.

This is not even considering the dependency we have on mechanics. Our lack of knowledge is our enemy here. We are dependent on the trustworthiness and honesty of the mechanic, something we cannot judge unless we have had experience with them. And that experience could be costly.

I just can't imagine buying a living room set, spending $25,000 on it, and then buying all new furniture for $25k again in 5 years. If the couch needs reupholstering, we don't say "Well this job will cost $1,000 and I can only get $3,000 out of this set at a garage sale, so I should just buy all new furniture!" - no, we say "$1,000 is worth it, this furniture cost $25,000!". We expect value out of the things we buy, why don't we expect it from our cars? And when repairs do come up, why do we ignore what we originally paid when evaluating whether the repair is worth it?

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