Your Money: Fix it or sell it

Dave Ramsey: When deciding whether to fix a car or sell it, you should consider whether repairs would pay off by raising the car's value more than the repairs cost.
BY Dave Ramsey Published: September 3, 2012
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DEAR DAVE: My old car has been having lots of problems lately. Do you have any advice on how to decide when it's best to just fix an old car or get a newer one instead?

Kristin

DEAR KRISTIN: This is a good question! Mathematically, the first thing to look at is the car's worth if you don't make repairs. Should you spend $1,000 to increase the value of the vehicle $500? Dumb question, right? At that point, you sell the car as-is and put the $1,000 it would take to fix it toward something newer.

On the other hand, let's say you've got a little hooptie worth $1,000 but by putting $500 into it, you can have it up and running again. Suddenly it's worth $2,500. That's money well-spent, because what you've done has significantly increased the value.

The other side is that at some point, the hassle factor of an old car can turn it into a money pit. If you can't get anywhere because the car's always busted, then you need to find something else for the sake of safety and reliability. If this happens, though, you should still pay cash for a better car. Even if you're not taking a step up in price or fanciness, it's still better than taking on a car payment. I'd walk or ride a bike everywhere before I did that!

DEAR DAVE: About 17 months ago, my wife and I allowed a lady who had lost her home to a fire to move into an empty house we own and had thought about selling. During that time she's made no effort to pay rent.

My wife wants to write it all off and just give her the house and title, but I think she owes us something for putting a roof over her head. What do you think?


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