This week, I celebrated my birthday.
Sadly, no one told my beloved SUV. Instead, I took my vehicle to my trusted mechanic because I needed an oil change and thought that changing an air filter might assist with a little acceleration problem I’d been experiencing. Instead, my SUV walloped me with a $2,900 estimate!
That’s not an inconsiderable amount for a car repair. It turns out that my clutch is slipping. That’s the mechanic’s lingo for my clutch is not working properly and I can’t safely drive my car until this extremely vital part is replaced. Yes – I drive a vehicle with a manual transmission. Unfortunately, a clutch is only good for about 150,000kms.
So I had a decision to make. My SUV is 13 years old. Yet it only has 137,000kms on it, which means there’s 70,000-100,000kms left on the engine. I’ve been with my mechanic for 17 years and I trust him, which means I believed him when he told me that the major components of my SUV are still in good shape. The tires are good – the brakes are fine – everything else on my car is fantastic. Barring a collision, I should be able to drive my car for another 5-7 years. My plan had been to replace my car in 4.5 years.
Still, a $2,900 repair bill is not a drop in the bucket. Despite its low mileage, the Kelley Blue Book value for my SUV is between $5900 – $6100. And a quick review of Auto Trader disclosed that a similarly aged SUV with slightly lower mileage than mine was listed at a price of $7,500. However, I couldn’t in good conscious sell my SUV without disclosing that it needs close to $3,000 of repairs… so no way am I getting $7,500 for this vehicle.
And if I were to sell, then I’d have to buy… I’m not a fan of car shopping. Besides, did I mention that I love my SUV? I’ve kept it for 13 years because it’s a great little vehicle.
So, on one of my favorite days of the year, I had a decision to make. Would I repair the SUV that I loved and drive it another 5 years? Or would I sell it at a discount, let someone else drive it for its remaining life, and proceed to buy something else?
After much deliberation and consultations with trusted friends, I decided to repair my SUV. I can continue to drive it for several more years. Clutches need to be replaced, so this rather large expense is not out of the ordinary.
Some reminded me that conventional wisdom is that a vehicle should be replaced when the repair is 50% or more of its value. On the numbers, my repair bill was just shy of 50% of my SUV’s value. Others reminded me of the global chip shortage, which means that there are fewer new cars available for purchase. Still others focused on the fact that I could drive my car for a few more years once this repair was made. One person reminded me that I “could afford” to buy a new vehicle, without compromising my long-term financial goals.
At the end of the day, I chose to repair my SUV. Why?
Mainly, I couldn’t get past the fact that any buyer would have to repair the clutch. The buyer would then benefit from the additional years of driving my SUV. Whether owned by me or someone else, my SUV needs a $2,900 repair in order to run. Why shouldn’t I be the person to benefit from the remaining years of life in my vehicle?
Besides, I abhor shopping for vehicles. There’s nothing on the road today that is an absolute must-have for me. As I mentioned above, I have loved my SUV from the minute I bought it 10+ years ago. I’m not yet ready to give it up.
With age comes wisdom.
Allow me to assure you of the following bit of financial wisdom. If you own anything with wheels or a motor, there will eventually be a big expensive repair. There is no telling when that day will come. You need to prepare for that day by having cash set aside in a savings account.
When I heard $2,900, I didn’t waste a second wondering how I would pay for the repair. Fortunately, I could jump right into the question of whether to keep or sell my vehicle. Thanks to years of funding my emergency fund and various sinking funds, I have the money on hand to pay for this expense. The only question I seriously pondered was whether I should.
Unexpected expenses are a fact of life. They can be financial zingers that throw your whole budget into disarray. They force you to re-prioritize how you allocate money and whether you allow yourself to go into debt. The first rule of handling unexpected expenses is to have savings. The second rule is to replenish those savings after you’ve used them.
Unless you already have one in place, set up an automatic transfer from your day-to-day chequing account to a savings account that is strictly dedicated to handling the unexpected. I would suggest $10 per day, which is $70 per week, or $3,650 per year. You know your budget better than I do, so maybe you can only do $5 per day ($1,825/yr) or maybe you’re fortunate enough to do $20 per day ($7,300/yr). The higher your per diem, the faster you build up your ability to handle life’s unexpected expenses. Pick a target amount for your savings account, then transfer your per diem amount into this account until that target is met.
The beauty of savings is this – they always curb the impact of unexpected expenses on the rest of your financial priorities. So while a $2,900 car repair bill was not on my birthday wish list, I’m fortunate to be able to take it in stride. Happy birthday to me!