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When you should repair a car vs. just replacing it is a decision made by weighing a multitude of variables. The question, “When to repair my car or just replace it?” has just about as many answers as the multitude of variables. This question can be answered with intensely complex mathematics or a simple ‘Pro’s n’ Con’s’ list, and in a sense both answers could be just as legitimate or illegitimate. Here are just a few variables to consider:
- How old is the car?
- What condition is the body in?
- What condition is the interior in?
- What condition is the engine in?
- And so on…
There’s a couple good answers to consider though. The American Auto Association released a guideline that suggests when a repair exceeds 50% of the ‘book value’ of the car, it’s time to replace it. Or consider a new engine that cost $2000 vs. a $500 per month new car payment. Put that way, the decision to replace the engine makes great sense. If you spend between $1,500 and $2,500 repairing a car in a year, that comes out to around $200 per month spent on the car. However, $200 per month in repairs is still cheaper than a $300-$400 per month car payment. Also keep in mind that buyers aren’t impressed by the money spent repairing a car and probably won’t pay more for an old car with a brand new engine. So if you choose to repair it, don’t expect a huge or even fair return when it does come time to sell it. Alternately, consider that replacing it may still cost you more and for a longer period of time. That said, the answer to the question of whether to repair or replace is to be determined case-to-case on an individual basis of circumstance.
Another question asked in relationship to saving on auto repairs is, “Can I deduct car repairs in my taxes?” If your car IS NOT used for business, medical, or charity purposes, than the answer is NO you cannot. However, if your car is indeed used for business, medical, or charity there are ways to deduct repairs. Here we cover the two most practical ways one can deduct repairs on a business use car.
- The standard way to deduct is through mileage driven for these tax-deductible purposes. With the standard mileage rate, you get no direct deduction for repairs because repair costs are factored into the standard rate (53.5 cents per business mile in 2017).
- There is also an ‘actual expense method’ which allows you to write off costs. The ‘actual expense method’ uses percentage brackets to figure deductions. For example, if you drive your car 50% of the time for business, you can deduct 50% of the running cost which includes 50% of repairs.
If used for business, medical, or charitable purposes, most of the expenses incurred to keep the car running are currently deductible for the full amount in the year the expenses were incurred.