Should I trade in my car now or keep it until it dies? – A debate on vehicle financing strategies

Unless you live in a city with a decent public transportation system, you probably need a car to function. And unfortunately, cars aren’t cheap. Even when we set aside the cost of maintenance, fuel, and auto insurance, a car payment itself can eat up a huge chunk of your budget.

In this Reddit post, we have someone who’s wondering what the best approach to vehicle ownership is. One option is to keep cars for a long time and drive them until the wheels are practically ready to fall off. Another is to trade in a vehicle every few years, thereby replacing your car before it starts to have major issues and unloading it at a time when it has decent resale value.

There are pros and cons to each option. Let’s dig in so you can make the right call.

Driving a car until it dies

With proper maintenance, a good car can last 15 years or longer. The upside of driving a car until it no longer runs is that at some point, you’ll stop having a monthly car payment to make. That’s money you can use to pay for the other costs associated with vehicle ownership as well as save for other goals.

Imagine you have a $500 monthly car payment for 60 months, but you keep your car for 15 years. After five years, you’ll have an extra $500 a month in your budget for the next decade.

Even if you have to spend some of that money on repairs as your car ages, let’s say you spend the equivalent of $200 a month on those. That leaves you with $300 a month to save and invest over an extended period of time.

On the flipside, the longer you keep a car, the more issues it might have. Some of the repairs you run into as your car ages could be very expensive to address. Plus, then you have to deal with the hassle of fixing your car repeatedly.

Trading in for a new car every few years

The benefit of frequently trading in your car is twofold. First, you never have to drive a car that’s particularly old. Secondly, you can potentially avoid having to shell out a lot of money for repairs.

If you trade in your car every three years and get a new car with a three-year warranty, you’re pretty much guaranteeing yourself that you won’t have major issues to pay for. Plus, if you trade in your cars before they get too old, you may be able to get a decent amount for your trade-ins.

On the other hand, with this approach, you’re pretty much guaranteed to always have a car payment. That means you’ll perpetually be in debt, which could be an issue if the time comes to borrow for a house or take out another large loan. That said, if you’re able to afford your car payments each month, this approach isn’t terrible at all.

From a credit score and borrowing standpoint, having a car payment is only an issue if it eats up a large percentage of your income. If it doesn’t, it may not be a problem.

Both strategies work

In response to the post above, many Reddit users were quick to favor the first strategy — driving a car until it no longer runs rather than trading in every few years. But if you keep your car payments affordable, either strategy could work well for you.

There’s also nothing wrong with admitting that you’re someone who likes to drive a newer car. That could lend to a better quality of life. As long as you can afford the second approach, there’s nothing wrong with it. It’s only when you take on too expensive a monthly payment that things really become problematic.