We get this question a lot here at the shop. It especially comes up when the cost of a repair approaches the value of a car. The best answer is that it is almost always cheaper to fix a car than it is to buy a different one. Only in very rare circumstances such as a transmission or a motor replacement, does it make sense to replace the entire vehicle and even then it can be cost effective to perform the repair. Here's how the math shakes out:
Including depreciation, interest, repairs, and maintenance a new vehicle costs about $5800 per year to own. The same expenses on a used vehicle add up to $3200 per year. That's a savings of $2600 per year! (I excluded license plates and insurance because it varies so much be inevitably a used car is cheaper here too.) The savings is even greater if you have the vehicle paid off because there is no interest to pay.
However, vehicles are emotional for most people. Many of my customers can't bear the thought of spending $1200 on a $2500 car even if it saves them $2600 that year.
The benefits to repairing a vehicle exceed the cost savings in other ways too. First, you know it has been cared for and who cared for it. Second, you might also know that there are no major hidden problems to surprise you. Third, you position yourself to take advantage of the full value of the repairs you've paid for. Fourth, it's also greener to repair a vehicle than replace one. New cars take many more resources to produce than repairing old vehicles, and scrap yards are not exactly environmentally friendly places.
At some point a vehicle will come to the end of its life but that point is usually much farther along than most people are willing to go. At that point we can help you make that determination. In the meantime, consider the significant cost savings and investment of repairing your vehicle. What would you buy with $2600 extra per year?