My wifes car is at the end of its life, it’s an 09 Subaru with north of 250,000 miles on it. I would say for the last 2 or 3 years it’s needed about $2500-$3000 in various repairs annually.
I’ve known for a while the day was going to come that it’s time to cut bait on this car but two things have always prevented me from doing so 1. I know the car market is still all screwed up with used vehicles going for overly inflated prices to the point where it almost makes sense just to buy new and interest rates being higher than they should be as well and 2. I always kind of get stuck on the Dave Ramsey mantra of if it’s going to cost you $2500 to fix the car, and you’ll need at least that for a down payment, then just fix the car and you won’t have a car payment, but I know there reaches a point where that stops making sense too.
So at what point does continuing to sink money into car repairs become a sunk cost fallacy? In my heart, I think I know I am already there, but I’m also overwhelmed by the prospect of car shopping, it’s been well over a decade since I’ve had to do so, and I’ve had poor experiences in the past.
When do car repairs become a sunk cost fallacy?
byu/spmahn inpersonalfinance
Posted by spmahn
45 Comments
Just buy a gently used 2020 plus equivalent vehicle and be done with it. At a certain point you have to favor reliability over being completely financially optimal.
Someone can do the math if they want but for me it’s when the repairs in a year cost more than what your monthly payments would be.
This wouldn’t include tires / brakes / oil changes.
Also stop being a Neanderthal and use some paragraphs breaks
It’s impossible to say. I think it hinges on your happiness with the vehicle.
I wish I didn’t do the $5000 engine repair work for our Subaru. But that’s because hindsight is 20/20 and we later had issues with the exhaust and the engine mounts and other issues. Another 2-4k in repairs. Had I known that was coming I wouldn’t have done the repairs
But if you don’t have a crystal ball and you love the car .. it’s often times worth doing the repairs.
Just know when to call it.
Edit: also my wife was already kinda tired of the outback but we just weren’t at a financial position to buy a car and have a note. It was the right decision at the time just not a great long term position.
As long as you require reliable car transportation, you have to look at the cost of a car as a contnual expense: You’re either paying on a loan or saving cash to buy the next car with. In the meantime you’re also paying for repairs. Over time that is a contnual expense that you never get away from, as long as you require a car.
Once you accept that, you can accept how much you’re willing to pay each month for a car. Once you have that number, you can compare that to what the current car costs to repair every year/month.
For example I paid cash for a gently used Honda civic years ago. I figured that if it served me well for a decade, then its purchase price over a decade was about $110 a month. That’s pretty dang cheap compared to people paying $250, $350, $500 a month for a car, and the car would likely last much longer than a decade.
If you are handy with car repairs, you can extend the timeline out. If you are paying a shop for all this, a replacement car will make sense sooner. A lot depends on your willingness to work on it, and how desirable the car is. I had a ’09 Honda Odyssey with 260k and the transmission went out, and converters were failing. Instead of spending $3500 on repairs, I sold that for $500, bought a 1999 Jeep XJ with cash, and that’s my daily.
The sunk cost is what you have already paid. Your evaluation of new versus keeping old would be based on marginal cost in the future. As an example, if it will cost you $6k a year for a new car and $3k a year to keep up the old for whatever your time horizon is, then marginal cost tells you to keep the old car.
The maintenance and repair costs generally go up each year. Compare that to the cost of depreciation, loan interest (if financing) and maintenance of a new/newer car. Insurance may go up too, but not always. There is also new safety features, technology and reliability to consider, the value of which are all unique to you. The newer car will almost always cost more so it will probably come down to what value you place on the intangibles.
I would keep the car. You are saying you don’t want to budget $200 a month in repairs so will instead budget 600+ for a new car, and higher insurance costs, to save $200 a month.
I think the way the math works is 1. The annual cost of a car payment 2. The annual cost difference of an insurance policy on a new car 3. The depreciation of said car.
As long as the car isn’t breaking down and leaving you stranded or affecting work or something, $3k a year is, what, $250 a month? That vs lets say a $15k loan for a used car at 6% for 5 years with fees included is $290 a month, plus higher insurance on a newer car most likely, plus when you amortize the loss in value of the car as well.
If you just don’t want the hassle, you can pay for the convenience.
What are the recent repairs that you have done? Suspension and all the fun stuff near the wheels can get expensive, but those are routine wear parts, same thing with timing belts and the like (idk if that car has a belt or chain).
Personally me and the wife have a beater 3rd vehicle that’s worth about $1000 and we put about $1000 a year into it for repairs. It doesn’t bother us because it’s paid off and 13 years old. Insurance is crazy cheap for it. We run it to avoid putting miles on newer vehicles because of the cost of newer cars. I won’t stop fixing the thing until it’s ridiculous expensive. It’s a Hyundai Elantra and the things are so trashy I can almost always find a cheap junk yard part for 1/5 the cost of a new part.
$2500-$3000 annually seems like a reasonable amount to spend for a car that age. $3000 a year works out to be $250/month car payment. The average car payment right now in the US is north of $500/month. If you buy a new(er) car would it be bought outright or a loan?
From a purely financial perspective there’s not a clear answer. Newer cars are generally safer which is an ambiguous reward. Newer car would likely be more reliable which you could quantify with reduced maintenance costs in both $ and time. FWIW I just got rid of an 03 trailblazer that was an absolute gem with only 140k because maintenance costs were averaging around 3k a year the last two years and the frame was going to rust out in the next 3 years or so. If I had a household that needed a 2nd car I would have definitely kept that until its end but went with getting a new car when I saw a good interest rate deal, used cars just did not seem worth settling for since I had good credit and income.
Depends upon the car. I doubt your car will need $2-3k in repairs every year, I think you just had a couple of expensive repair years in a row.
Is that $3k in dealership dollars or independent repair shop dollars? That can make a big difference.
For me, I’d get rid of the car when the cost of repairs is particularly high (about twice what you’ve been paying yearly) OR there’s long term damage, such as to the engine or transmission.
…but I also like to keep cars on the road.
When it hits salvage value. Typically bathtub of failures of a car its around 13/14 years old. The other is mileage of 150k.
These are rules of thumb but you will notice “gear” head circle jerk right around this price/mileage/years
We have a line item in our budget of about $6,000/year, for car purchases ($3000 each). That money goes into an account and accumulates. When we have enough to buy the car we want, we give ourselves permission to buy the next car. What normally happens is we go about 10-12 years and just decide it is time. I drove my last truck 15 years. It still ran fine, but it was at almost 200K miles, I was ready to move on and I had cash to buy my next one. Probably did not fully optimize the useful life of what I already owned, but it was planned and within budget. It sounds like it is time if it fits your budget to get a new one.
“So at what point does continuing to sink money into car repairs become a sunk cost fallacy?”
Honestly, I think it is only something you can really determine after the fact. If you need $3000 worth of work and can reasonably expect nothing else major to go wrong for 12-15 months, then that is $200-250 per month.
If a new car is going to cost you more than that, then sticking with the one you have might be better. If you get lucky and you need nothing major for even longer, then even better. If other things crop up sooner than expected, then I guess you take an ‘L’ on that.
That works out to $200 – $250/mo for repairs. The average new car price as of 2026 has reached $800/mo.
With that in mind, what kind of repairs are you needing? Are you going to the dealership? So many people only trust the stealership for repairs, but they take advantage of this and absolutely screw customers on part costs, labor rates, etc.
I’m no mechanic, but I’ve fixed a handful of things on my friend’s Subaru for pennies by comparison. Just watch a quick Youtube video or two, order the part online, and set aside some time on a weekend. Cabin air filter? $10 part that takes 5 minutes to replace, dealership charges $100 – $120. Window motor? $40 part and about 30 minutes of time. The dealership charges anywhere from $250 – $500.
My point being, you can save a ton of money by doing things yourself, if so inclined at least.
Personally I would keep driving it until it doesn’t go anymore.
If you think about it you are never getting a car payment for 250 a month.
Those things are pretty solid if maintained. My coworker had 457k on theirs before it went. And it only went because he didn’t change the belt before it snapped ruining the engine.
My dad is a mechanic and we drove everything until it was basically unrepairable or needed an engine or transmission. I drove a paid off 2011 accord for 10 years before giving it to my teenager. And the time it was paid off I just put that money away like a car payment. When the time came for a new car I had a good chunk to put down for a car payment. I doubt I will ever own anything as reliable as that car again.
Your wife’s car has cost you $3,000 a year in maintenance with an average of 15,000 miles a year.
Putting 45,000 miles a year onto a newer car would likely have cost you close to that in depreciation costs and that newer car still would have needed brakes, oil, tires, belts, and the like. It’s not as though you’ve lost a ton of cash but at some point in time you begin to have enough unreliability that the car doesn’t serve its purpose.
I’m not sure the things you’re fixing on the car but you can cut bait now or you can ride it out and just stop with maintenance and beign the long spiral towards automotive death before getting a new car. Both are viable in the right situation.
Realistically it boils down to available funds a lot of the time.
Folks can typically cobble 1-3k for repairs each year, but adding a large monthly car payment would be crippling.
Continued theme of “it’s expensive being poor” which meowadays really bleeds over into middle class as well.
If you can’t actually get over those hurdles you’re stuck bashing against it unable to really build the funds to get over it.
And that goal post moves so damn quick these days.
In your case I think you are at the end of the road for that car, but you don’t need to rush out and buy something right away.
Start saving money towards a new car. Shop around and do your research now when you can relax instead of waiting until that car blows up and it’s an emergency.
You still might get a couple of years out of your Subaru depending on what its overall condition is. So minor repairs, tires and brakes or other routine maintenance are still worth doing. I probably wouldn’t spring for a set of top quality tires for $1k though.
Then you can decide whether you want to buy a car in a couple of months of shopping around or just wait for the next big repair and buy then. But when the end comes for that car you should have already done your homework.
It became ludicrous at least 2 or 3 years ago.
What value could you get for your car now? There is some value in extracting whatever equity you can from the current car before that goes all the way to 0
When you can’t rely on it anymore to get from point A to point B. At that point the car loses its function its purpose
The used car market has settled down a bunch from the craziness of a few years ago. Right now it’s just specific models of vehicle that still over priced. There’s still lots of reliable cars out there going for cheap, you just have to do more research now
You can’t just go buy a Toyota Camry or Honda Civic.
As for your circumstance, I would absolutely get a new vehicle. 2009 puts you in the years of Subarus that had had gasket issues. Your Dave Ramsey equation doesn’t account for you putting $3k into your car for the engine to blow a month later and not have any money to put down on a new vehicle.
I dunno, I just dumoed 6 grand into restoring my old 2001 expedition.
I replace cars when the maintenance cost is greater than a new car payment or when it is no longer reliable enough to travel safely.
I had a good mechanic and I relied on his advice in terms of when a relatively expensive repair *should* get me enough months to make it worthwhile.
Also factored in to my calculation is how much I relied on a really reliable car. When I had a long commute on the freeway I was more likely to get a new car at an earlier stage versus when I was only using a car to get around short distances in an urban area where breaking down wouldn’t be as potentially problematic
I similarly had to part with an 07″ car last year. It needed similar 2k-3k repairs every year and while the engine was still more than fine the structure and other components were just wearing out. And those things cannot really be fixed. I hear you that it’s tough when the car is paid off, but you need to feel safe that the integrity of your vehicle isn’t going to come apart at any moment either.
Price out one of those extended warranties, choose a reputable company, and compare that to the cost of a new car. $3000 a year seems very high for repairs unless you’re putting tremendous numbers of miles on it. I think most full warranties run about $1400.
“Sunk cost fallacy” means “I have to keep the car because I just spent $5k on repairs.” That’s bad thinking.
The only thing that matters is “What makes the most sense going forward?” The common choices are:
1. Total cost of getting a different car for the next 5 years. Which usually breaks down to: Sell current car for $X MINUS new car price $Y MINUS $Z cost of interest MINUS $W cost of insurance and maintenance = some negative number
2. Total cost of keep the same car for the next 5 years. Which usually breaks down to: Negative $W cost of insurance and maintenance = some negative number.
If #2 is less negative than #1, that means keeping the beater is cheaper than getting a new one. This is common.
If the numbers are close enough where you’ll be happier with a different car, go for it. You’re allowed to pay for happiness.
define various “repairs”. Sometimes people lump things like new brakes, tires, and etc., into “repairs” when it should be maintenance.
The unmentioned cost is that of being without transportation (or, worse, being stranded somewhere at the mercy of whatever repairs might be available in the area). When the probability of this starts to grow significantly – and every case is different – then you should consider the cost/benefit of not-being-stranded as well. Being stuck at your local supermarket is very different than being adrift in the plains of Wyoming.
Grandpa always said when the monthly repair bill consistently exceeded the monthly payment on a new car that it was time for a new car.
$3000 a year in repairs, that works out to $250 a month in repairs on average. I doubt you are getting a new car payment less than that.
Figure out what the payment would be for a new or slightly used vehicle, something just off lease so someone else took the initial depreciation hit. Save what you would be paying for a new car every month, pay any maintenance expenses out of that and when you have enough saved go buy the new(er) vehicle outright. Stick that money in a HYSA or brokerage account so it gets some growth in the mean time.
Not having a car payment is great if your car works. But if you’re spending 2500/ year to keep your car running, that’s $200/month. Add in that the car goes out of commission for at least a few days when you need to repair it and $400/mo for a car that’s reliable seems like a better value.
I’d shop around and buy new for a manufacturer financing deal. 2% interest isn’t unheard of for something like a new Subaru or Toyota
I try to determine or estimate the operational costs of the vehicle. Gas tends to account for $0.12-0.15/mi of that at ~36 mpg. And I determine all the maintenance I’ve done and the cost of purchasing the vehicle until I get a total $/mi. I try to track this cost annually in hopes of waiting to see the inflection point.
A brand new car might cost >$1/mi the first year or two as the purchase price biases you high until you put miles on it, so I’d like to wait until the maintenance gets substantially higher or reliability becomes a concern for older vehicles. You could do a similar exercise by asking yourself how many miles this maintenance effectively buying you. Will a $5k repair squeeze at another 50k miles? If so, that extra $0.10/mi may be better than spending $8k on a car that might get you 75,000 miles with non-routine maintenance.
If it can be repaired, then I repair and keep driving. If the repair costs are way above the value of the car, then maybe replace. A new or used car is gonna run you $500-$800 per month, so the $3k/year might be worth it.
I just paid $5500 for a new engine in my 2016 Camry with 280k miles. That’s after I paid $3300 in other repairs before I knew the engine was going to need replacing.
With that said, $8800 vs $500/month car payment & more expensive insurance, the $8800 choice was still a better deal…as long as the transmission doesn’t explode within the next year anyways.
It all depends on what your future cost ACTUALLY are..
Do you commit to a car loan and fixed unavoidable monthly cost until paid off… Or gamble on unexpected repairs that have a huge each-time cost.
Sunk cost is about rationalizing your past expenses, but you need to weigh what your anticipated future costs are or may be.
Personally when I buy a car I have a plan for it. Meaning I know how many miles I drive a year, the common problems with the car, and my plan for how long I plan to keep it. So for my wife for instance she drives on average about 7k miles a year. Her last car lasted 13 years, and she had 85k miles on it. Because we live in the rust belt cars typically age out much quicker due to corrosion. Her last car we wanted 10 years from and we got 13 years. Her current car I ended up searching for 8 months before finding a deal I was satisfied with. Thankfully I didn’t wait until we were forced to buy. So that’s basically form a plan work the plan. Find a car that fits your budget, and figure out how long you plan to keep it. The biggest problem for most people with vehicles is they get bored and make horrible decisions financially. Automakers aren’t doing the US consumer any favors either because they have eliminated all the low priced vehicles for higher profit larger vehicles. Until market forces force automakers to change why should they? That market force may come in the form of government regulation change vs consumer demand as well. It’s happened in the past.
to answer your question, you need to first know what the definition of “sunk cost fallacy” is. In this regard, do you believe that you will pay *less* than 3K a year for a new car?
As long as repairs are constant, if the value of the car repaired is higher than the cost of the repair, I go for it.
What kind of Subaru? That’s way too much in repairs unless you live in the rust belt and components are failing due to corrosion. As a Subaru enthusiast I have older cars that I maintain for way less with similar miles. I’m guessing you’re doing a lot of unnecessary repairs or partial repairs that aren’t fixing problems. I think if you keep the car you need to learn how to fix minor stuff yourself. If you aren’t interested in that, which is fine most people aren’t, just buy a new car.
Your misunderstanding the sunk cost fallacy here.
The value of the car is its ability to transport you from X to Y. Any value in addition to this is ancillary and objective based upon your feelings. So let’s assign a value to that transportation cost.
Your saying the maintaince cost of your wife’s current car is 2-3k, so let’s say 2500 or 208.33 per month. Now add in gas, let’s say another $100(this is a wild guess, we can adjust with better information). We can say another $100 for insurance. This means your spending 408.33 on transportation per month.
Now let’s find out what the cost of say a $30,000 new car is. Google is telling me a car note on that will be around 585 over 60 months. So $585 a month, maybe a bit better on milage so $80 a month, but definitely more on insurance due to being new and needing full coverage due to the loan so closer to $150 a month. Maintaince should be cheaper, but isn’t gone so let’s budget $80 a month to cover our oil changes, tire changes and other things as needed. So that brings our total cost of transportation up to $895 per month.
As such the math says keeping the old car running is still cheaper than buying a new car from a purely cost perspective. That doesn’t mean this is always true or that math can’t change when comparing to lightly used or something. The key is to actually run the numbers to see if it actually makes financial sense instead of going on vibes that “repairs are expensive better get a new car”.