When is it time to ditch an old car?

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Update, June 16, 2021: It's a great time to sell a car. Used car prices are high and inventory is low. It may not be a great idea to wait for the market to keep getting hotter, though. Here's a cautionary tale of how I held on to my old car a bit too long.

I probably held on to my car for too long. From when I got my license in 2004 until the end of 2014, I drove a 2001 Honda Accord. The transmission finally died just after Christmas.

It would have cost about $3,000 to replace, which didn't seem worth it, especially since these big repairs were coming up more and more often — I had just replaced the timing belt a year or two earlier. I persevered with the car because it's what the personal finance experts I was reading at the time said to do: Avoid new cars because they come with depreciation and debt. But at a certain point, holding on to an old car stops being worth it.

The question is when.

What are the signs it's time to sell?

This decision varies depending on the person. A driver often forms an attachment with their car. Heck, I had a Honda Accord, one of the most ubiquitous cars in the world, and I still feel a little nostalgia when I think about the good times I had driving it.

But old cars eventually require expensive repairs. Matt Jones, senior consumer advice editor for Edmunds, suggests repairs are probably not worthwhile if their cost exceeds about 25% of the car's value, because they are usually followed by more breakdowns.

"If you have a car worth $2,500 but you've got a $1,300 repair, it's probably not a good thing because there's going to be more and more repairs," Jones said.

You may love your car, but at a certain point, you must decide whether your emotional attachment is stronger than the financial factors, Jones said. If it is, feel free to hold on to your car and keep spending money on it. But you'll have to make a decision as those repair costs climb.

Older cars start needing expensive TLC when they approach 200,000 miles. Major services like replacing a timing belt or transmission could cost more than $1,500 each, Jones said.

It can be confusing for a driver to predict these expenses and track the depreciation of their car, said Troy Snyder, vice president of the consumer division at JD Power. Consumers can see what a car is worth using JD Power's National Appraisal Guides website, Edmunds or Kelley Blue Book.

"Most people don't know this data exists and they don't know how to get it," Snyder said.

Why keep an old car?

On the other hand, keeping an older car does have some financial benefits. Auto insurance premiums for older cars are often lower because they tend to be cheaper to repair, Jones said. The rate of depreciation is usually slower than when the car first comes off the lot. And, if you took out an auto loan, a car becomes much cheaper to own once you've paid it off.

Why get rid of an old car?

Keeping an old car might seem more appealing to someone who doesn't want to take on a big auto loan. But a newer edition also comes with less hassle and fewer unexpected expenses, Jones said. When the transmission on my Honda died, I opted to get a used Mazda.

While it cost much more than repairing a transmission, it also came with a much newer transmission. It's better on gas and it's safer. I got much more than a working transmission for my money.

Cars are changing

Jones' first car was a Volkswagen he bought for $300. You could buy a repair manual at Pep Boys. Most fixes required simple tools and limited technical knowledge.

Things are different now.

"You pop the hood of some of these cars and you're looking at a bunch of wires," Jones said.

Without special equipment and electronic diagnostic tools, most people can no longer fix their own cars. Maintaining a car has become more technical — and more expensive — as cars become more advanced, Jones said. While you could drive a car until its wheels fell off in the past, now there's a whole bunch of technology that could fail in addition to the mechanical elements. In the future, that shift could make it less cost-effective to hang on to an old car.

Looking for ways to save on the cost of a car? We've got 10 auto insurance hacks right here.

Image: RuslanDashinsky