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Do Vegas right. Check out the Fremont Street Experience and purchase your tickets to Slotzilla, a zip line unlike any other, at vegasexperience.com. (upbeat music) If you've ever been faced with a major car repair, or even worse, a bunch of ongoing car repairs, and sat there and said to yourself, man, I am just wasting all of my money on this thing.

Maybe I should go get a new car. Well, I've been there, and a lot of people are there, and it's not easy to know what to do in that situation. So today, I'm gonna share with you some thoughts about how I would answer the question of when to decide whether to fix your car or replace it.

(upbeat music) Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets, and I'm your host. Thank you so much for being with me today. Today, we're gonna talk about cars. Probably the ultimate whipping post of the personal finance industry. We love to get mad about them and talk about how much money we spend on them, but they're kind of important.

And I'll tell you, I've struggled with this decision, struggled to figure out how to give you good advice, so take my advice today, test it, and then let me know what you think. (upbeat music) Specifically today, we're gonna pull apart this question, and this is a question that has always bothered me a little bit.

I like to have a framework for most decisions. If I can ever create one, I really like to have a framework for financial decisions that will give me the opportunity to be able to know what to do in most situations. But the question of what to do when your car breaks is not an easy question to answer.

It's really, really not. And I've heard various pieces of advice, but even on this subject, there's not a continuity of advice. Probably, I guess, the only major piece of advice that I have often heard is the idea that if your car gets to the point where the cost of repairing it is gonna be more than half of the value of the car, then you should replace it.

But even there, where does it come from? It's always really, really bothered me. So I'm gonna share with you some thoughts about how I approach a situation, and I hope it can be helpful to you. Because for many people, having a car that's either broken down or is continually breaking down, that can lead to a major, major financial mistake, where they go out and buy a new car.

So we're gonna talk in detail about that. Before we do, a couple quick announcements. Number one, this is episode 255 of the show. Episode 254 was an interview with J.D. Roth from Get Rich Slowly. And I would recommend to you that you check that out in the feed if you haven't heard it.

I made a mistake when I was publishing that show, and I set the date wrong. So for many of you, it showed up like a week in the past, but I've fixed that. So if you are just tuning into this show and you didn't hear or see the episode with J.D.

Roth, go back and check that in the feed and download and check that out. Also, let's talk about sponsors right up front today, and let's do this quickly today. Sponsor of the day number one is Patrick Snow, the publishing doctor. Patrick is my personal publishing coach. He's been on the show.

If you'd like a full introduction to him, go back and listen to episode 252 of the show. And there you'll have an hour-long interview where we talk about publishing, publishing a book, and why you should consider it. The statistics indicate that many, many people, at least 80%, about 80% of the population, would like to publish a book.

And in terms of your career and enhancing your career, publishing a book can make a huge, huge difference in your overall marketing plan. So definitely would recommend that you consider it. Patrick is an expert in this area, and he's got a tremendous wealth of resources to guide you through the whole publishing process.

I have found and am continuing to find his information and content to be extremely valuable for me as I work toward the publishing of my own book. So check out his information. You can go to his website at thepublishingdoctor.com, thepublishingdoctor.com. If you are interested in checking with him and getting some information about the publishing process, the best way to get in touch with him is shoot him a text message, and he will be glad to offer you a complimentary 30 to 60-minute consultation on the publishing process.

He can hear a little bit about your story, hear a little bit about what you're doing, and give you some insight and some ideas that would be helpful. Best way to schedule that is text him at 206-310-1200. 206-310-1200, and that info will be in the show notes. Sponsor of the day number two is Paladin Registry.

Paladin Registry is a service that I went out and looked for in an effort to respond to your requests about how to find a good financial advisor. And Paladin Registry is a service where they come together and they vet financial advisors. A lot of information that you should know about that.

Please go back, if you haven't heard it, and listen to episode 248 of the show. That is an hour-long interview with the founder of Paladin Registry, Jack Waymire, and in that show, we talk in detail about the need for a registry service and how they screen advisors, et cetera.

So start by listening to that show, and then go to the Paladin Registry link at radicalpersonalfinance.com/paladin, P-A-L-A-D-I-N, radicalpersonalfinance.com/paladin. And if you are interested in potentially interviewing financial advisors, put your info in there, and they will do their best to connect you with a few different advisors in your neighborhood that they have screened and vetted.

And hopefully those will be a good place for you to start as you interview advisors for their ability to serve you. So radicalpersonalfinance.com/paladin. All right, let's talk about cars. So many of us are gonna be in this place of decision at some point. If you own a car (laughs) and you haven't been there in the past, you're gonna be there in the future.

And I've really, really struggled with that, trying to figure out how do we design a framework for the decision? And I haven't been able to come up with a perfect one, but I do have some thoughts. And I'll share with you a story because this really happened to me, what was it, earlier this year.

And I wound up in the scenario, the Sunday morning I had loaded up my family, we were getting ready to leave the house on Sunday morning to go to a church meeting. And I go out, start the car, and there's a big squeal, and all of a sudden it starts making some weird noise.

Well, I turn the engine off, I get out of the car, I go up and check and look down, and I can see immediately that the belt had come off, and I could see immediately that there was a piece broken. Cutting right to the point that matters, a few days later, got the car towed to a mechanic.

I was faced with a $2,500 repair bill. And what had happened was a pulley on the side of the engine had broken. And the way that the engine is constructed on my vehicle, there's a piece of aluminum, and the whole thing had broken off. So the whole side of the engine had to be replaced.

And basically, in order to accomplish that repair, you practically had to take the whole engine out of the car. So it was extremely labor intensive. Called around for different quotes to the dealerships, called around to a couple of mechanics, and the cheapest I could get through it was with about 2,500 bucks.

2,500 bucks is a lot of money to be spending when your car is not worth very much money. I bought the car a few years ago for about 5,000 bucks. And when you're sitting there trying to say, "Should I spend 2,500 bucks on repairing a car?" That is a difficult, difficult thing to decide.

And so I faced this personally. Ultimately, I wound up repairing the car. But we're gonna talk about that, and I'm gonna walk you through my thought process. Because this is the time to think through the questions so that when the situation hits, you'll be better prepared to know what to do.

The time to think through difficult situations is always in advance. It's really tough when you're faced with the emotions. Maybe you don't have a lot of money at that time, and then all of a sudden you're in the thick of it. Really tough to think things through rationally at that point in time.

It's easier if you've thought through the difficult situations in advance, so that you're prepared mentally for that difficult situation. So, what do you do in that situation? Car's broken down. Well, to begin with, remember the concept of zero-based thinking. Zero-based thinking means everything that's happened in the past, once your car breaks, everything that's happened in the past is irrelevant.

Those are all sunk costs. So if you are in the unfortunate situation where you've made a $1,000 repair on your vehicle, and then a month later it breaks again, and now you've got another $1,000 repair, you've got to ignore the first $1,000, because it's gone, it's a sunk cost.

You can't recover that money no matter what. So every time the car breaks, you've got to face it afresh, and ignore the things that have happened in the past. This is really difficult to do, because we're wired as human beings to think about all those past decisions again and again and again, and kind of bring the weight of all of those difficult circumstances to our present decision.

But it's a major logical fallacy. You've got to avoid that. So you've got to begin with zero-based thinking, and start with a fresh slate. Take it with the current decision, the current repair, and figure out what do you actually do now, and make a fresh decision. Every single breakdown or repair is a fresh decision.

You've got to do your best to ignore the emotion of the feeling of, I've been at the mechanic too much, these things have just piled up, and this car is always breaking down. This accounts for one of the major, major financial mistakes that many people wind up making, where the emotion of a vehicle that breaks down several times over several months starts to wear on them.

And that emotion kind of chips away, chips away, chips away, chips away, and over time, it just gets heavier and heavier and heavier with that feeling. And as it wears on you, you wind up in a situation where finally many people just simply snap. And when they snap, they say, I've had it with this old clunker, trot down to the dealership, buy another car really quick, and they often make poor decisions.

Many times those poor decisions then follow them for months and years and really hamper their progress. This course of action is not for you. I recommend you think about it now so that you don't do that. When you're looking at the situation of your car repair, focus on the actual facts.

And this is where you need good records and you need good facts. Check your records and find out how much you're actually spending on the car. If you don't have good financial records, what'll happen is you'll spend 50 bucks here, $100 repair there, $287 there, and it'll feel mentally like thousands of dollars.

But if you can just simply go back and check your financial records and find yourself in a position where you can check, you realize, oh, I don't actually have that much. If you have those good records and you can go back and check, then you can actually know the facts.

So nickel and dime repairs, if it's ongoing repairs, they're emotionally draining, but they're not necessarily financially draining. Just pay attention to the actual facts. Always begin, if you're in a situation where the car's broken with getting the best understanding of the diagnosis of the repair and the potential costs.

Try to get accurate information. Good rule of thumb with any decision is the more information, the better, and the slower the decision, the better. Anytime you can push off a decision, especially a spending decision, just a little bit longer, buy yourself a little bit more time to think through, research, care for things, you'll almost always make a better decision.

There are exceptions to this rule. There might be, maybe, might be some types of opportunities that you need to jump on quickly. But those opportunities should be within your area of expertise. For example, you might be an expert investor, and if there's a company that, or a piece of real estate or something like that that you know a lot about and you just gotta buy right now, then go ahead and move quickly.

But if you don't actually, if you're not an expert, buy yourself more time. More time, more time, more time is always a good rule. Pushing off almost all spending decisions is generally helpful. So with car repairs, try to buy yourself more time, do more research, get another opinion, and get accurate data.

Try to get an understanding, is this a maintenance item or is this truly a repair item? All cars are gonna have maintenance items. Doesn't matter whether they're new cars or they're used cars, all cars have maintenance items. And so one of the mistakes that people can make is they might have a number of maintenance items that all occur in a bunched together time period.

They need new tires, then they need to replace the timing belt, then the alternator breaks, and then they gotta get a new battery. And they're looking at this thing getting so frustrated saying, "I've just spent $1,100 on this car," when every single one of those things are simple maintenance items.

They're not a catastrophic breakdown, they're not an indication that the car is somehow falling apart and has to be replaced, that's just normal maintenance. And all vehicles are gonna require normal maintenance. So even if you go and get another car, your problem is not solved. You still have to deal with the normal maintenance of that new car.

The really catastrophic breakdowns are rare. They're very rare. They do happen, but they're rare. My car, the repair I described to you, that was a catastrophic breakdown. The vehicle was unusable unless I spent the $2,500 on fixing it. And I did my research, I could not find any way to get the repair for cheaper than that.

So it was either spend the $2,500 on the catastrophic repair, or the car's unusable. But that's really rare. Engines don't usually blow up. Transmissions don't usually just fall apart. And those are the two major components of the vehicle that are gonna actually experience those catastrophic losses. Most of the other things are just simple maintenance items.

So don't let the maintenance items get you down emotionally. They might be starting to pile up. It might be time to consider a new car. We'll get to that more as the show develops. But don't let them get you down emotionally. As you're looking at your decision criteria, and you're considering this decision afresh, do some assessments.

Assess the condition of the car, and ask yourself, if this car were repaired, what would be the condition and usefulness of the vehicle? Assess your needs and figure out what the baseline decision is. Anytime you're making decisions, you wanna start with what is the baseline decision, and then compare that decision, decision A, we'll call it, to other options.

Decision B, decision C, decision D. So the example here, if you were actually considering purchasing another car, your baseline decision, usually, if you have a broken car, is gonna be to repair the car. That's almost always going to be the cheaper option. So that's gonna be the baseline decision.

If your car was perfectly good yesterday, before it broke, if the car were repaired, it would probably still be perfectly good. So since repairing the car is almost always gonna be the cheapest option, let's just choose that as your base. And then everything is gonna be compared to that.

And you're gonna weigh all the decisions in light of that. So reassess your needs, establish the baseline decision, and then start comparing them. You know the costs, go back and look at them, and you have an estimate of the repair. So now we've got a known quality to the car if we were actually to keep that car.

So that's usually the first decisions. Now, are there situations in which you should replace the car? Yes, probably. But let me give you some of the major reasons why you should keep the car and repair it instead of replacing it. Number one, most actual repairs are really not that expensive.

Maintenance items can add up, especially if they've been deferred. But they're really, like I said a moment ago, there are very few major, major repairs that happen on cars. Next, worse, it's really hard to sell a broken car. If your car is actually broken down, it's very, very difficult to sell that.

You've taken your marketplace of opportunities, of potential buyers, from this massive marketplace, and you've broken it down to just this very narrow window of people, a very small number of people that would be willing to take on a vehicle that has an unknown mechanical condition and fix it. You're basically dealing with mechanics, maybe a professional, or a shade tree mechanic, somebody knows a little something and they can go ahead and fix a few things.

That's a tiny slice of the marketplace. And any time you're selling something, you wanna have the most potential buyers possible. The more limited the number of your buyers, the more difficult it's gonna be to sell something, and the more difficult it's gonna be to sell something for a really good price.

So it's really, really hard to sell a broken down car. Tiny marketplace, they're experts, and they're gonna be investing labor, so they're gonna wanna deal. So almost always, if you fix the car, at that point in time, if you wanna go out and sell it on the open market, you can do that.

But you take your potential buyers from this tiny little subset of people, and you expand it to a much bigger marketplace. So it's tough to sell a broken car. Worse, in general, the biggest cost of car ownership for most people would be the depreciation. And when people are sitting there with a car that is broken down or continually breaking down, and they're considering, should I replace it, they're usually thinking about upgrading the car to a more expensive car.

That's usually the consideration. It's very rare that somebody is sitting there with a $5,000 car and saying, well, this car is breaking down, so I'm gonna replace it with this other $5,000 car that's gonna be more reliable and break down less. If you're making that decision, then if you can go from equal value to equal value to a vehicle that's gonna be breaking down less, that's gonna be a better decision.

But most people aren't doing that. They're gonna upgrade the car. So here would be an example from my situation. I bought my van for 5,000 bucks. The market value when I bought the van was about 7,000 to $7,500 for vans of that type of thing. And I'd shopped a lot, worked aggressively to look around and find a deal, and it was a hard deal to find.

Most minivans were stuck right at that $7,000 to $7,500 price range, and then ultimately I found this one, and it worked out that I was able to get it at a discount. I moved fast, gave the guy cash. He wanted to get rid of it. It was a business owner, and so it worked out well.

I was able to get the deal. The repair bill, though, was 2,500 bucks. So if I were to go out and say, "Okay, I'm just gonna go out and find another van "at market value," I couldn't be assured of being able to find another $5,000 deal. And maybe I could have, who knows?

Maybe I could have found a better deal, but I couldn't be assured of it. And knowing how long it had taken to find that $5,000 deal, I knew that I needed to, I couldn't count on being able to find one. So I'm automatically, to replace like with like, a van in my current condition with a van in similar condition, I'm gonna be moving up to 7,500 bucks.

Now, at that $7,000 price range, using a 15% estimate on the amount of money that I'm losing every year on depreciation, I'm taking a hit of about $1,000 loss every year that I own a vehicle. So if I were to go out and buy a $7,000 van, a year from now, it's gonna be worth six grand, and I'm gonna be out 1,000 bucks.

That's kind of a pain. Now, the cool thing is by getting the discounted van, I've already got more wiggle room in the deal. So I automatically have to factor that there's gonna be an additional $1,000 cost of going out and buying the $7,000 van. Now, most people, and I wouldn't necessarily, I'm not saying this right or wrong, most people wouldn't repair and replace a $7,000 van with a $7,000 van.

So let's say what would be a more normal consideration for somebody whose vehicle's breaking down, breaking down, and they wanna go out and upgrade a little bit. What about a $15,000 van? Well, a $15,000 van is gonna lose $2,250 of value in the first year on my ownership and depreciation, or basically the same amount of money that it's gonna cost me to repair it.

But the depreciation is a guaranteed loss, and then in year two, there's gonna be another $1,912 depreciation, and then in year three, there's gonna be more depreciation, and more depreciation, and more depreciation. But if I'm comparing just the cost of depreciation with the vehicle to the cost of the repair, that catastrophic repair is unlikely to happen in year two or year three or year four.

It's probably a one-time cost. So if I fix the vehicle today, pay the $2,500, yes, I'm equal to going out and replacing it for the next year, but with owning the vehicle at the much lower cost, I'm limiting the downside of the depreciation, and I get to keep more money in my pocket, versus going out and buying the $15,000 vehicle, in which case, every year going forward, I'm gonna lose a couple thousand bucks until that value ultimately drops down lower.

And the bigger the price jump, the worse it is. So if you were to jump from a few-thousand-dollar car to a $30,000 vehicle, well, now there's an automatic loss of $4,500 in depreciation in the first year. And this is why many people's financial situations are just simply destroyed, especially people who don't have a lot of money.

They're driving an old car, driving an old car, driving an old car, here's what happens. They get frustrated at the continual maintenance items. They get frustrated, and then all of a sudden, some repair, a $500 repair comes along, and now they're just really, really upset. And so they go down to the dealership, they make a snap deal on a car that's poorly considered.

What often ends up happening is they don't make a new car decision wisely. They'll buy a cheap car from a cheap brand that doesn't have a good maintenance record, doesn't have a good warranty, doesn't have a good name brand. They'll buy a Chevy Aveo or a Kia Optima or some type of cheap car that is gonna just depreciate like crazy, and they go out, they make a quick deal, massive financing costs, other decisions, and they lock in losing $4,500 of depreciation in the first year.

They bought a $30,000 vehicle instead of paying $800 or $1,000 to fix the car. Well, you make a cycle of that year by year by year, and then over time, your financial situation is destroyed. I don't like to lose money, and I recommend that you not lose money either.

So calculate carefully the cost of depreciation, but make sure you also include some of the other costs of transitioning from one vehicle to another. Big thing, transaction costs, and those transaction costs really eat into the numbers. So again, let's go with my situation when I did this analysis. If I were gonna replace my vehicle with a similar comparable vehicle, which my baseline decision was the vehicle I own, 2007 Hyundai Entourage minivan.

It has the appropriate space, the appropriate amenities that I needed. I'm really a fan of the minivan concept. It's the best vehicle. I use it a lot. I use the space. It's really, really great. And that era is new enough to be appropriate enough, but yet it's old enough to have a bunch lower price ranges.

The age of the vehicle should be good as far as repair items. I like basically everything about it. And cheap insurance costs, really high safety ratings, et cetera, so I had carefully considered the decision before buying it in the first place. So that's what I wanted again. So if my $5,000 vehicle that I had paid for, I had to make a $2,500 repair, but to replace it with a comparable thing, I got to spend $7,500.

What additional expenses? We talked about depreciation, but what about new sales tax? 6% of a $7,500 new vehicle, $450. In my state, Florida, it was 6% sales tax rate. New registration, tag, titling fees, another 200 bucks. So you start adding that first year depreciation to the new tax, to the new titling fees, or any other costs.

Usually when you get a new vehicle, it needs new tires, it needs a new battery, it needs new wiper blades, it needs all the stuff that somebody ignored. Well, now I'm about another $1,700, $1,700 to $1,800 of new costs that could be avoided by simply repairing the existing vehicle.

If I've got new tires on my vehicle, I did. Those tires have a lot of life left in them. If I've got windshield wipers, those windshield wipers have a lot of life left in them. Registration costs already paid. So when you start adding those costs, it adds even more friction to getting the new vehicle.

And then even worse, I still, if I were to go out and buy a new vehicle, I still didn't solve the initial problem of actually selling my old vehicle. How do I figure out how to sell this thing in a non-functioning state? Maybe I could sell it to a mechanic for 2,000 bucks, which means then I'm losing all that residual value.

So even with a really expensive repair like that, you can start to see the massive difference that even facing a big repair, it's better to keep it and fix it in most places. Another major thing. If you impulse buy and you've got to move fast, you are now in a bad bargaining position and you'll always lose a deal when you're under time pressure.

The major way that you're able to get deals is by being patient. This is a simple example, buying cars. The best deals on a car is often gonna come from a private party, somebody that you find, whether it's a car sitting on the side of the road, somebody that's in a distressed sale, or they're just going through a life event and they wanna be done with it.

That's usually gonna be the way that you get your best deal on a vehicle. But those things are hard to find right now. If you wanna go out and buy a car, you can usually in most towns, you can go drive the country roads and you can find some cars for sale.

But they might not be in the price range, they might not be exactly what you're looking for. If you need to buy a car now, you've gotta go where they have selection, which is going to a dealer. Well, the dealer is gonna take the private party value that they paid for it, plus their markup, and that's what you're gonna pay.

So you're paying when you go to a dealer, new, used, doesn't matter, you're paying for the convenience and the selection of them having their ability to actually have the vehicle there. So if you've got time and you're continually shopping, you can get a deal, but you can't make those deals materialize right when you need them.

So impulse buying or buying fast means you're automatically gonna pay more money. So you're usually better off if you can repair it, and then at your leisure, go ahead and look around at upgrading the vehicle. So hopefully these examples are helpful when you're looking at the big repair. With the little ongoing repairs, again, take a look and actually run the numbers and ask yourself, which items are the maintenance items and which items are the repair items?

All cars are gonna need those maintenance items, getting a newer car is not gonna change anything. Your newer car is gonna need a battery after two or three years, just like your older car is. So look through and carefully tabulate how much is maintenance and how much is repairs, and don't let the maintenance items unnecessarily influence your emotions.

That's just part of the cost of operating a vehicle. Regardless, if you do decide that you need to change cars, make sure you choose very carefully and do your best to separate the emotion from the decision. So if you need to borrow a vehicle from a family member or from a friend who has an extra vehicle, or if you need to rent a car, or if you need to use Uber for a few days, do that so you can go slower and make a good decision.

Don't compound one bad event in your life with more bad decisions, otherwise you wind up screwed over time. So don't compound those bad decisions. At some point, break the cycle, and if your car is breaking down on you and you need to do a new one, go carefully. Buy a reliable car, choose carefully, buy yourself time, let some friends help you out.

Now, big thing that happens to people, what if the car isn't paid off and you're trying to figure out how do I move on to the next vehicle when the car isn't paid off, and I've got all these repairs? This is one of the major traps that keeps people poor.

And be aware of it. It's, in most cases, not gonna be a problem from this perspective, that since it's usually gonna be better for you to repair the car rather than replace it, just repair the car and keep on going. But if you repair it and keep paying the loan down until you get out of this trap of owing more on the car than it's worth.

So don't cut that bad decision. If you owe money on the car, that's a bad decision to owe money on a depreciating asset. So cut it off as quickly as you can, repair the car, and then work on selling it. That's always gonna be better. The basic thing that you gotta remember with cars is that they're a total money suck.

And if you wanna be wealthy, you've gotta, gotta, gotta, gotta, gotta minimize the amount of money that you lose on things that go down in value. So buy the least expensive transportation that meets your needs. Clarify the needs, and buy the least expensive transportation that meets your needs. There are some times, it doesn't necessarily always mean the cheapest of the cheap.

Cheap is not always cheap. Sometimes spending a little bit more is gonna buy you better. And sometimes you should buy something more. If your car makes you money, choose carefully. For example, there's a major cost to downtime. If you're actually making money with your vehicles, downtime costs you. If you are running a fleet of over-the-road delivery trucks, those trucks better be in good shape.

Every hour that one is sitting by the side of the road broken down costs you money. And that's a measurable number, which is why you'll often see a large company that's running a fleet, their vehicles are newer, because there's a cost to downtime. If you're making money on a vehicle and actually earning, then in that situation, downtime becomes your biggest expense, not depreciation.

But what about you as an individual person? Does your car make you money? Maybe. Maybe your car gets you to work, and this actually really hurts poor people sometimes, that they have cars that are breaking down often, makes them unreliable, it can cause them problems where they're unreliable at work 'cause they can't get there.

Which by the way, helps somebody if they're in that situation. Help them get out. Give them a few thousand bucks or give them a car. Give them your $4,000 car as you're trading up to something nicer so they can have some reliable transportation. 'Cause that's one way that you can help someone to break that cycle of poverty.

But as an individual person, we've got more options. Don't freak out about the car being broken down. In a world of Uber, you're better off than you've ever been. Uber is fundamentally transforming things. And I am personally much less worried about having unreliable transportation than I ever was in the past.

Here where I live in Palm Beach County, taxis are horrendously expensive. And this is a huge county where everything is far away. But at this point in time, if my car were out of commission for a couple of weeks, it would be not that big a deal to me because number one, I've got a strong family network that can help me out easily and lend me a car.

I've got a strong friend network. People can help me out, lend me a car. And I've got Uber. And I can get around a few times a week and pay 50, 100, 200 bucks for Uber. And that's a lot cheaper than losing thousands of dollars on a much newer and nicer car.

So what are the things that you can do today to prepare for the eventuality of your car breaking down on you? Plan and save. If your car is nickel and diming you with ongoing repairs, it might be time to upgrade. So the time to make that decision is now, not when you're frustrated at the car breaking down.

Plan for the upgrade. Start shopping for a deal now when you've got time on your side and there's nothing broken on the car. That'll help you because you can find the deal, take your time finding what you're gonna buy, and then you can take your time finding the buyer for your car.

And you can sell it as a working car at a much higher price point than as a broken down car. So if your car is nickel and diming you and you've done the analysis of which of these costs are repair items and which of these costs are maintenance items, recognizing that all cars are gonna have maintenance, then go ahead and plan.

Find a good deal. Take advantage of the seasonal deals, rebates, special incentive programs if you're buying a newer car. Take advantage of a friends and family deal when one comes along or when you see a great deal on the side of the road. And then plan and save now in case you face a catastrophic repair.

And it is possible that you could wind up in the situation where your car is simply not worth repairing. In that case, have a plan now for what type of car you'd like to buy and why. I would encourage you, think ahead at all times about what's the next vehicle that you're gonna buy.

I know exactly what, if my car were totaled in an accident today, I know exactly what the next car that I would buy is. So have that plan, know the market values so you can keep your ears open. And by just simply planning ahead if a catastrophic loss happens and if you run the analysis and you need to buy another one, then you'll make a wiser decision than if you just jump because you're emotionally frustrated.

Pay attention to brands, pay attention to reliability. A lot of the problems that people face, and this is one of the major cycles of poverty that happens is when people make fast decisions and they don't think carefully about them, those decisions tend to compound. They buy a flashy, convertible Mustang because it looks cool.

But they wind up finding out that it's actually a really unreliable car and there's all these expenses that are associated with it and it's really not safe and it's breaking down all the time. So then they jump from one thing to the next and they jump to a new car that has all these other things associated with it.

And these snap decisions, snap decisions, snap decisions, many people repeat them again and again and again and again. And then they wind up years later saying, but I had to make this decision. No, you didn't. Stop making bad decisions quickly, slow down, go carefully, and plan ahead and you'll make wiser decisions and hang on to more of your money.

Wanna touch on two last things and we're done for today. Number one, the discussion of the half the value rule. That's the only kind of rule of thumb that I've heard people say. If your car repairs are gonna cost you more than half the value of the car, then it's probably better to replace the car.

Take the money, sell it, take the money and put it with your cash and buy the newer car. I really can't even, although I understand the sentiment behind it, I can't justify this one. I can't make it work for me personally because even if my $4,000 car, I've been in a situation, a $5,000 car and I gotta fix it and it's $2,500, I'm still probably better off fixing it, driving the car that's a known quantity and then selling it in the market value as a repaired car versus a broken down car.

I don't know where to get a good price for a broken down car. And I don't know where anyone else would either, unless you were a mechanic and you could fix it up or you had some kind of inside line on it. So even that rule of thumb that you'll hear about, if the repair is more than half 50% of the value of the car, personally, I can't make it work.

I can't make it make logical sense. If any of you guys think I'm wrong, I'm happy to be shown why I'm wrong, but I look at it and I just simply say, a working car is better to be sold than a non-working car. Second thing, cars last longer than ever.

So choose carefully, make wise decisions, pay a lot of attention to reliability and when you're paying attention to reliability, hopefully you'll wind up better in the long run. So don't be scared of a car and run out and trade it in just 'cause it's got 100,000 miles or 200,000 miles.

Run the actual numbers on your actual situation and make your decisions based on data, not based on an emotional feeling. And I believe that if you'll do these things, you will wind up significantly more wealthy over time. That's it for today's show. That's what I wanted to share with you.

Hope this is useful to you. If any of you have better ideas than me on this one, I would be happy to hear from you. If you found have better articles, I have searched to see if anybody else has any good insight on this. I've not seen it. I've not found any justification for these rules of thumb.

But what I've learned is that you guys, the Radical Personal Finance listening audience are actually a lot smarter than I am. So if you've got any really great resources on this, if you think that my perspective on it is wrong, come tell me why. Come by the show notes for today's show and let me know why I'm wrong.

I'd be happy to hear from you because I have struggled and struggled to come up with a good answer for this one. But at this point, you've heard my answer. Almost always better to repair and then transition over time. It's totally cool to buy a newer car, totally cool to buy a fancier car.

Just do it intentionally and don't do it on an impulse. Life's not about being the richest at the end of the day. There's a minimum acceptable standard. If you're a millionaire, unless you wanna drive around in a $500 car, don't do it. You know, drive a nice car. But just don't make, I just hate seeing this decision.

I've seen over the years more mistakes made in this area than anything else that I can think of, of people, cars breaking down, dig mechanic bill. What do I do? And it's tough. It's tough to know what to do. So that's it for today's show. If you have benefited and appreciated this content, I would thank you for supporting the show.

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