In the 40th episode of 'Retire Early Retire Now,' host Hunter Kelly from Palm Valley Wealth Management addresses a listener's question regarding whether to repair or replace a car. The listener is facing a costly AC repair his car. Hunter provides a comprehensive analysis, considering factors such as car age, mileage, repair costs versus car value, and financial circumstances. He also offers practical guidelines for purchasing a new car if needed. The podcast is aimed at helping physicians and attorneys make informed financial decisions to retire early or now.
Check out the Palm Valley Wealth Management Website PalmValleywm.com
In the 40th episode of 'Retire Early Retire Now,' host Hunter Kelly from Palm Valley Wealth Management addresses a listener's question regarding whether to repair or replace a car. The listener is facing a costly AC repair his car. Hunter provides a comprehensive analysis, considering factors such as car age, mileage, repair costs versus car value, and financial circumstances. He also offers practical guidelines for purchasing a new car if needed. The podcast is aimed at helping physicians and attorneys make informed financial decisions to retire early or now.
Check out the Palm Valley Wealth Management Website PalmValleywm.com
Should I replace my car or repair my car. We're going to answer a listener's question today on retire early retire now. And welcome to the 40th episode of retire early retire. Now I'm your host hunter Kelly owner of Palm valley wealth management. And I do this podcast every Tuesday morning to help physicians and attorneys either retire early or retire. Now, and today we're going to answer a listener's question. And the question is from Cameron. Cameron says, I love listening to retire early retire. Now I have a question regarding repairing or replacing my car. I live in Florida and my AC recently went out the dealership, quoted me about$3,500 to fix the AC. Uh, the car is currently seven years old. It has about 75,000 miles on it. The trade in is about$11,000. I'm leaning towards just getting it repaired, but I'm not sure when I should just call it quits and purchase a new car. And so. Great question, Cameron. but oh boy, uh, the AC going out in Florida at this time of year. Um, seems like Murphy's law because that's been in the mid nineties to a hundred degrees every single day, at least for the last three or four weeks. And, uh, I can't imagine driving to work or anywhere for that matter, uh, with no AC in the car. So. Uh, hopefully you can get that thing fixed or replaced. rather quickly. Um, but. Before we dive into what to consider and everything else. If you're liking this podcast, go ahead and leave a five star review on your favorite podcasting app. And we have a new feature on the description in the podcast. You can actually send us a message or send me a message through the podcast. Uh, to answer your listeners questions. It'll just be a link on the top of the description says, send us a message. So if you have any comments. Uh, of things you want to hear on the episodes or have a question. That may be, could be an episode. Topic would love to hear that. And, uh, we are still going to be recording on YouTube, but we took a break. Uh, just for a few weeks, I'm actually redoing my office so we can have a better background. More visually pleasing, if you will. And then we'll jump into that. But my, my office right now is, uh, a mess. So nobody wants to see that. Let's jump right back into Cameron's question. So again, Uh, thanks for sending that question. And this is a great question. One that I get quite often. Um, especially from people just starting out. And so there are a bunch of considerations that you would want to make on determining whether you should repair. or whether you should replace it right. So a couple of things that you want to consider right off the bat. One. Is how old is the car? Right? Um, is this car. Uh, fairly new. Did you just buy it? A handful of years ago. Um, or is it a deal where it's a 10, 15, 20 year old car? That could come up with some sort of repair Uh, repair. In the next few months or, uh, within the next year or so. And that's just going to continue to happen because this is an older car. Now, obviously we know that Cameron's car is about seven years old, has 75,000 miles. So we want to daytime consideration to me, especially how cars are made. Um, nowadays. Uh, cars should easily be able to get to 150$200,000 or 200,000 miles on the car. Right. And so for cam and situation, I wouldn't really worry about the age or the mileage too much, just because, um, you're still kind of in that sweet spot. Uh, you still have at least another 75,000 miles that you can put on the car. Um, if not more, if you're taking good care of it, things of that nature, getting the oil changes, uh, as you're supposed to getting it checked up. Replacing brakes, all the things that have maintenance toward the car. Right. And so the next thing you would want to consider, well, what is the cost versus, the value of the car is. Right. And I think Cameron is on the right track as far as leaning toward getting the AC repaired. Um, his car is still relatively new. Um, it's, it's not necessarily on its last legs. So getting it replaced, what would make more sense? Um, and so there are some other considerations that you would want to make. Um, obviously your financial situation. Um, and so I think this is more where his question was leading to, I think he, he understands, yes, I should get this car repaired. Um, but what if this happens in two years, three years, four years, five years. One is that breaking point on. When I should actually get this thing replaced versus preparing it. And so I'm going to assume, because it's a seven year old car he's likely has a paid off, so he doesn't have a car payment. And so that, that was probably at least an emotionally deciding factor. Like, I don't want to buy a new car because I'm likely going to have a new car payment. If I don't have the cash on hand to. To put down for that. Uh, with the trade-in value and everything else. So. Uh, just considering that. Um, there are some other things that we want to consider, right. And so, uh, let's say this AC breaks three, four or five years from now. Well, the value of the car is going to go down obviously significantly. Cause there's going to be more miles. It's going to be older. Things of that nature. And so, uh, once we start getting that repair costs close to about 50% of what the actual value is of the car, then we want to really start considering. Well, is this repair really worth it? Um, especially if I have 150,000 miles on it, cause now I'm going to put a 3, 4, 5 grand into this car and I'm only going to get, uh, maybe 25,000 miles out of it before the transmission goes out or something much larger goes out. Right. And so. As the car starts to age, we want to make sure that we're considering how often. Uh, these certain repairs are happening. Um, and then what are the costs of the repairs? And if they start to build up, uh, with, uh, an amount of frequency or an amount of cost where it's starting to get about 50% of that market value, then we want to start to consider, well, maybe I should replace this car. And then the next thing would be your financial situation, right? Um, What can we comfortably afford if Cameron really wanted to, could he go out and buy a new version of his car or a new car in general? And it not wrecked the rest of his financial situation or pushed back retirement or potentially buying a new house? Um, whatever his goals are. So if he has specific goals that he's trying to reach and. Buying the car in 2024, wasn't on a particular list and that's going to push everything back. Well, his car is new enough right now where he gets out replaced and he has a solid emergency fund. Well, that may not mess with his goals much, right. Or if at all, But if he decided, Hey, I'm going to buy a new car. And now he has a$30,000 loan or a$25,000 loan and a car payment. And now he's out some cash. Cause he had to put a down payment. Things of that nature and that pushes back some of those other goals that he has. Well, we definitely don't want to replace the car. Right. But let's say he's in a good spot. He has the car he's been living well within his means. And he has quite a bit saved up that's over and above his emergency fund. Um, he's okay with taking on a new car payment. Maybe it's a very small percentage of his income, so that debt. Maybe it's 2, 3, 4, 5% of his income. Whereas now, if I purchased this car, it's not going to push back. My retirement goals or vacation goals or kids' education or buying this new home, whatever that is. Um, if it's not going to push back, well, then maybe it might just be more satisfying to go buy that new car. Right. And so there's always that balance of. Um, yes, maybe the most financially sound situation. Um, is to just repair the car, but if I've done everything else, correct. And I can still accomplish my goals and I kind of just want a new car because it's getting a little bit older. Um, maybe his family dynamic has changed or getting ready to change. Uh, as far as kids or kids graduating high school and leaving, go to college kids getting ready to drive. Uh, maybe they're having new kids. I don't really know his situation that well, Um, but. But there could be a big changes. So why not go ahead and get a new car that would suit the needs a little bit better. If it's within your financial means it is not going to push back any other goals or squeeze your cashflow, things of that nature. Now from a, just a pure. Financial situation or a logical situation in this particular case. It would make more sense for him to go ahead and just get it repaired. Now, if this AC went out. 2 3, 4 years from now. It might make more sense for him to go ahead and just replace the car, right. These are some things that you should consider when weighing, should I replace the car or should I repair the car now? Why are we're while we're on the topic of replacing. Uh, Cameron's car, some generic things that we want to. Uh, or generic guidelines that we want to abide by when making these purchases are one, we want to try to put a 20% down payment. On that new car. So that would include any trade-ins that you have. So for buying a$50,000 car, we would want to try our best to at least put$10,000 down. Um, and then we would want to make sure. That we paid that car off within three years. the next thing you would want to consider is, uh, making sure that. The amount of payment that you're going to make every month is not going to exceed about 80% of your gross income. So if we can. Stay within those guidelines. And it's not going to push back any other goals that we may have. Um, within our financial situation. Then purchasing a new car would be totally plausible and doable. Now, if you have the decision and you make the decision to replace the car, and now it's 20% of your income that is going to this car payment. You have a six year note on it, things of that nature. Well, then we probably don't want to make that decision because now it's put strain on our cashflow, uh, to be able to save and stay financially stable. At least for the foreseeable future, as long as we have that note. And to consider the note like we want to get that car paid off within three years because the, the value of that car is going to drastically decrease over that time. Especially if you're driving a lot. And I'm putting a lot of miles on it. It will decrease. So we don't want to necessarily be upside down. We don't want a market value of the car being$10,000 and us owing$20,000 because we can never kind of get out of that rut. And we're going to have to come out with a bunch of cash to get to that next car. So to wrap up. Thanks for the great question, Cameron. Uh, it looks like. Uh, in your situation, I think just based off the information you gave me about your car, I think repairing, it would probably be the best bet, but if you have a similar, uh, repair or break down in the future, And you still have the same car, then maybe it will start to become time to look at potentially replacing it. If you already have a hundred and twenty five, a hundred fifty, a hundred and seventy 5,000 miles on the car. Um, and so again, thanks for the great questions. Hope everybody has a great 4th of July. This weekend celebrating the independence of United States of America. And so we'll see you in the next one. This podcast is for educational purposes only. It is not meant to be financial, legal or investment advice. Do not make decisions solely based on this podcast, please seek a tax legal, financial, or insurance professional when considering your own situation. Please consider Palm valley wealth management when making those considerations.
