Fix It or Sell It?
Kristin asks how you decide when to get rid of a car or fix it. Dave explains.
QUESTION: Kristin on Facebook asks how you decide when to get rid of a car or fix it. Dave explains.
ANSWER: Mathematically, the first thing you would look at is what the car is worth if you don’t fix it. Let’s say it’s worth $4,000 if you don’t fix it and $4,500 if you do. Is it worth it to spend $1,000 on it? Should you spend $1,000 on a car to get it to go up $500 in value? I wouldn’t do that. At that point, you sell the car for $4,000, you put the $1,000 you were going to spend on it with that $4,000, buying a $5,000 car.
Let’s say that you’ve got a car, and you can spend $500 on it. It’s worth $1,000 or $1,500 right now and you spend $500 and get it going again. All of a sudden, it’s worth $2,500. That’s money well spent even if you’re going to turn right around and sell it. You’re kind of fixing it up to sell it or fixing it up to drive it. You’ve got to change its value by what you do.
The old joke is if you’re driving a hoopty and you put new tires on the car, you double its value. That’s not a good idea. Now, you’ve got to put new tires on the car, but the point is you don’t want to spend more on the car than you increase its value. That’s the math side.
The other side of it—the other point on this—is that at some point, a hoopty reaches a hassle factor that is not mathematical. It’s just you can’t freaking get in the car and go anywhere because it’s always busted. Every time we’re driving somewhere, it leaves me lying on the side of the highway. We just can’t go there. You reach a point that you’ve got to get a different hoopty just because you’ve got to have a level of reliability. You’ve got to get rid of this level of hassle factor. If that’s the case, you’ve got to move on the car too. Usually, at $4,500, that’s not the case, but you could get into a car at $4,500 that’s doing that. Most of the time, it’s not. In that case, though, we’re going to pay cash for whatever hoopty we move to, and we’re going to make a lateral hoopty move. We’re not going into debt. We’re not using this hassle and all this emotion as an excuse to go into debt on a stupid car. I’d ride a bicycle before I’d go into debt on a car.