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My car has apparently has a blown head gasket...

The options at this point are basically:

  1. put $5k into an 8 year old car with 120k mi that is otherwise in good shape (with a 2 year warranty on the new engine), or

  2. spend $15k on a newer (used) car -- which will essentially be an unknown quantity in terms of what kinds of problems it may have.

How do you decide which is the better course? (In my case, I've got a trustworthy mechanic to do the work.)

Edit: In the end, we decided to replace it. Sold the car to the mechanic, who tried to revive it, failed to do so, and is now stripping it for parts....

Thanks to all for the helpful advice.

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$5k to fix a head gasket? Ouch... –  George Marian Aug 13 '10 at 21:28
    
Well, $4-5k to replace the engine, the head gasket is the last straw on the engine... –  bstpierre Aug 13 '10 at 21:38
    
What kind of car is it? I see from a comment below that is a Subaru with a 2.5L engine, but what model? Typically high performance cars have higher maintenance costs, especially in the case of Subaru with their AWD systems. So if you stick a new engine in and later find you need some repairs done to the drivetrain or transmission, well there you go. A cheap, FWD econo-box like a Toyota or Honda of some kind may be the way to go if you want basic transportation. –  Paperjam Aug 25 '10 at 1:03
    
@Paperjam: It was a Legacy Outback wagon. (Occasionally known as "The Daddywagon".) AWD is nice in the snow, of which we get a fair amount, and the roads around us aren't all that well maintained. That said, we opted for the FWD econobox route as a replacement like you mentioned. –  bstpierre Aug 25 '10 at 1:15
    
Looks like you made the right call. Good luck with your new ride. –  Alex B Aug 25 '10 at 1:33
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4 Answers

up vote 4 down vote accepted

The value of the car is only of interest if there is an intention to sell it aqain.

I would make the following calculation:

  • Add up the costs of the repairs and maintenance that you expect for your car
  • if you intent to sell the car, subtract from that the amount you will achieve at the time of sale
  • Divide the result by the time (number of years or number of months) you believe you will use the car (until wrecking it, or selling it)

This gives you the costs per time period that the car really costs you.

Now do the same with a new (used) car you intend to buy instead of this car. With the new car you also need to add the costs of buying it (sales price, plus any interests and fees if you finance it).

If the old car costs you less than the new car, keep it, otherwise get the new car.

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Is the car worth $5K?

If the car is not worth $5K, sell the car for scrap or parts or whatever and add that tiny amount to your purchase for a new car.

If the car is worth more than the cost of repair ($5K), I'd fix it up.

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Right now (i.e. b0rked) it's worth maybe $1500 for parts (new tires!), but with a new engine it will be worth more than what I put into it. Sound body, good transmission, etc. –  bstpierre Aug 13 '10 at 21:42
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A lot of articles about this kind of thing ask you to do the simple math: $5k < $15k. If you've got a trustworthy mechanic, and you're looking to save money, it's simple, you're looking at $10k in savings, not even counting interest, higher insurance, etc.

On the other hand, if you're just lusting after a new car, and don't mind spending the extra money, then why not?

As you mentioned, however, if you think you'll get at least the value of your repair back, you might as well get the car repaired for $5k, so you'll be able to get around town. If you still decide you want a new car, then you'll have a trade-in worth $6500 instead of $1500.

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As a car guy, I would question the wisdom of putting in a new (read - usually reman) engine into an 8yo car. Unless the engine is known to have longevity issues, I'd try to find a good used one, say from a crashed car, and swap that in.

The labor part is going to be roughly the same obviously but if the cost of the engine halves, you might still end up with cash in your pocket.

This mainly works if the cost of the engine is substantially higher than the labour, if it's the other way round get a new/reman engine with a warranty.

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The 2.5L subaru engine is known to have longevity issues, thus the reman. –  bstpierre Aug 14 '10 at 11:18
    
@bstpierre, Ah, you should have mentioned that. Headgaskets on these are a not unusual from what I hear but given that you are hinting at other issues, I'd probably lean towards a reman engine then. To get most out of the money you put in, you probably need to consider driving it until it needs yet another engine. –  Timo Geusch Aug 14 '10 at 14:38
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