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The following article is from MSN and was originally published 8/2002.  We found it interesting and thought you may too...
The Basics
Keep your old clunker or buy a new car?
It may clang and bang, but your despised old car may be the best bargain around. Here are the facts on keeping the bucket-o'-bolts running and knowing when it's really time to upgrade.
By Des Toups

Letís divide the car-buying universe into two camps: those who keep a car until it drops, and those who think a new car will change their lives.

To the first, a round of applause. Thereís nothing short of the bus thatís cheaper than keeping a car until it crumbles into a pile of rust. Almost any car can be nursed to 200,000 miles without endangering your life, and even a new engine is cheaper than all but the cheapest used cars.

To the second, another round of applause, because the 16 million or so new cars they buy every year instantly become used cars soon available at a considerable discount to those in Camp 1. And a moment of silence, because a new car will change their lives in ways they never foresaw on the dealerís lot.

If youíre in a drive-until-the-muffler-is-dragging wannabe, read on. Weíll look at ways to keep your car on the road longer and realistically weigh the costs of upgrading.

Iíd love to keep my old car, but Ö
  • It no longer fits my life. You may have taken up gardening in a big way but still own a Corvette. You may feel nervous about taking your í78 Ford on a trip to Colorado. Your little Accord may be a tight squeeze when family comes to town. The answer to all: Rent. Why buy a gas-sucking pickup because you visit Home Depot twice a year or a $30,000 sport-utility because you take the kids skiing for a week at Easter? Even at $100 a weekend, renting is far cheaper than a car payment. Plus you get to drive the very latest without worrying about insurance, license tags, maintenance or depreciation. Or try swapping cars with a friend, returning it gassed-up and clean (with the oil changed, too, if the loan was more than a day or two. You want to be able to ask again next year.).
  • Those repair bills are really adding up. Then do the math. Does the cost of repairs exceed the cost of a new car? A typical new car is $21,000, about $350 a month for five years after 20% down. A rebuilt transmission might run $1,500, a huge outlay in one chunk, but far less than the $4,200 a year youíd spend on new-car payments alone. If you canít afford repairs twice a year, itís unlikely you can afford a new car payment every month. In any case, anybody with a car older than three years should be tucking aside $50 a month for repairs and maintenance. If the gods smile, youíll never use most of it and youíll have a tidy sum to blow on your next car.
  • Iím nervous driving an older car. Maybe little things are beginning to go: a new thermostat one month, a starter the next. You might simply spend $50 on a AAA membership and carry a cell phone, reminding yourself that even new cars arenít immune to mechanical failure. The upside of frequent breakdowns is that youíll get to know mechanics quite well. Find one you like. Flatter him. Pay your bills on time. And the next time he fixes your car, ask him to take a few minutes to see what else will need repair soon.

      Never skimp on maintenance
      Pay special attention to the things that will cost you a fortune if they break. That means regular oil changes, tire rotations and transmission tune-ups, even if the car is running fine. Timing belts, for example, are spendy at as much as $600, and replacing one for no other reason than that the odometer has turned 90,000 miles might seem wasteful. But let one break and you'll find that repairing bent valves could cost you three times that. Replacing torn CV boots, those plastic housings that keep grime and grit out of the carís constant-velocity joints, costs about a third as much as a CV joint repair. (If your ownerís manual is long gone, Carpoint has a free online service that tracks your carís service schedule.)

  • The repair costs more than the car is worth. A $1,500 engine rebuild that keeps your í83 Toyota on the road still makes good financial sense. Itís at this point, however, that all but the flintiest drivers begin to think about upgrading. Which brings us to our next question:

    Am I ready for a newer car?
    Your first step is to do nothing except write a check to yourself in the amount youíre thinking you can afford every month. Put aside a car payment every month for three months (long enough for at least one of lifeís little emergencies to crop up).

    To pass the time, make three phone calls: one to your bank, to find out what kind of rates they charge on loans to people with your credit history; one to your insurer, to ask the rates for comprehensive insurance on a model you think youíd like to buy; and one to your local DMV, to see what registration and licensing would cost.

    At the end of three months, ask yourself these questions:
    • How much did it hurt? If you skimped at all on other bills or shorted the amount of the payment, youíre not ready.
    • Would I have enough left over to pay for insurance and licensing fees each year?
    • Would I pay this much every month for the car thatís in my driveway already? Sooner or later, every new car becomes an old car, and youíll feel about the next car just the way you do about your old clunker.
    • Would I rather have the cash? Our typical car payment, $350, adds up to more than $1,000 in just three short months. Perhaps youíd prefer to get a tan in Mexico and limp along with olí Betsy another year.
    • Could I continue to save for another year and simply pay cash? Five grand would buy any of hundreds of reliable used models. Save for two years and youíre in new-car territory, if your old car will fetch a few thousand.

    If the craving for a shinier car hasnít passed in three months, at least you begin the shopping process with a few monthsí worth of car payments and a more realistic idea of the hit your wallet will take.

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