Should I fix my old car or buy a new car?

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Dear Driving for Dollars,
My car is almost 10 years old with more than 100,000 miles and is starting to cost me a lot of money. Last month, I spent about $1,000 on new tires and brakes and $300 to fix a problem with my power windows.

I love not having a car payment, but these costs are killing me. How do I figure out if the cost of repairs in the future is better than just biting the bullet and buying a new car?
— Kelly

Dear Kelly,
From a financial perspective, it’s almost always a smarter choice to drive an old car that’s paid for than to buy a new car requiring an auto loan.

While your old car is getting up there in miles and age, it doesn’t really sound like it’s requiring a lot of repairs. In reality, you are spending the majority of your dollars (at least what you cited in your question) on maintenance, and that’s a big difference.

Maintenance, which includes regularly scheduled work when your car reaches a certain mileage as well as wear-and-tear items — such as tires, brakes and windshield wipers — are costs all car owners incur, regardless of the age of the car. These costs don’t disappear with a new car — unless you buy a model with a free car maintenance plan, and then they may only be free for a limited time.

Even with an inexpensive car and an auto loan at a great interest rate, you are looking at a minimum of about $2,400 annually on car payments alone. It’s unlikely your older car will cost you $2,400 in repairs. Either way, you’ll likely be paying for maintenance.

Instead, don’t let the costs of necessary car maintenance on your used car sneak up on you. Put aside some money each month into a car fund, similar to the way you would if you were making a monthly payment on a car loan. Use the money from that fund for your current car when necessary. If you plan it well, you’ll have more money in the fund than you need, which you can use for a down payment when you decide to buy a new car.

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If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.

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