During times when your money is tight, your decision-making skills are truly tested.
Often, our financial choices — such as deciding whether to trade up to a newer car — are influenced more by our emotions than by a rational assessment of the cost.
One of the most frequent questions I get is whether it makes sense to buy a new or used car when facing an expensive car repair. Assuming the vehicle isn’t frequently stranding you on the side of the road, the scenario looks like the following.
Your paid-off car needs $1,200 in repairs. The mechanic is relatively sure you’ll get another year or two of good use from the vehicle if you fix it. But when you look at the trade-in value, you see the car is worth only about $3,000. So you start to wonder whether it’s worth it to just buy a new or late-model vehicle.
You’re at the dealer, eyeing the cars on the lot, and you hate dumping money into your older vehicle. You aren’t just looking for the new-car smell; you’re frustrated that your older vehicle is showing its age.
Here’s how the numbers look in this situation.
The average amount financed for new-vehicle purchases hit a record high of $43,759 at the end of last year, according to Edmunds, a car shopping website. The monthly payment on new cars averaged $772. For a used car, the average financed amount was just shy of $30,000, with a monthly payment of $570.
Adding in taxes, insurance and other fees, you’re looking at significantly more than the cost of a repair bill.
A $1,200 repair is roughly 1½ times a monthly payment on a new car today. If that fix buys you even six months of driving without a loan, you’ve already come out ahead.
The math gets even worse if you’re upside down on your car, meaning you owe more on your vehicle than it’s worth. The number of borrowers rolling in debt from a previous auto loan is at an all-time high. More than 29 percent of trade-ins for new-vehicle purchases had negative equity in the fourth quarter of 2025, and the average amount owed was about $7,200, according to Edmunds.
So now let’s look at current events, which may have you considering getting rid of your gas guzzler.
With gas prices rising, now averaging just over $4 a gallonnationwide and approaching $6 in parts of the western United States, you may be tempted to think that a new car — an electric, hybrid or more efficient gas vehicle — is the way to protect your paycheck from rising costs at the pump.
Clearly, $4 gas is causing panic. I hear it from readers worried about how it will wreck the rest of their budget. When I looked at Google Trends data, as of March 30, the search volume for “most fuel-efficient gas cars” showed a 56 percent increase over the past 30 days. There was a spike in searches for “best electric cars” and “hybrids for sale.”
Edmunds reported that as gas prices rose in the first days of the war with Iran, its site started seeing a modest uptick in car shoppers considering electric vehicles.
By the second week of the war, interest in battery-powered EVs, hybrids and plug-in hybrids accounted for almost 24 percent of vehicle research activity, up from 22 percent the previous week, according to Edmunds.
Of course, searches don’t necessarily mean people are ready to buy. And if you really need to replace what you’ve been driving, it makes sense to consider a vehicle that gets better gas mileage or possibly going electric. That could save you money in the long term.
But if you’re mainly focusing on surging gas prices and concerned it will only get worse, here’s sage advice from Jessica Caldwell, head of insights at Edmunds: “In today’s market, trying to offset higher fuel costs with a new vehicle purchase can quickly turn a $5 gas problem into a nearly $50,000 decision.”
I teach a lot about sound financial decision-making, and a major consideration is putting whatever savings you think you will net in perspective.
Edmunds has a “Car Cost vs. Gas Mileage Calculator” that can help you crunch your numbers.
For a gas-powered car, let’s say you drive about 1,000 miles a month, which is about the national average. You’re probably hitting the station three times during that time. With gas at $4.02 nationally as of Tuesday, those three fill-ups cost you about $145.
Here’s how a recent post on Kelley Blue Book worked the numbers for an EV:
Based on the most recent U.S. household average estimate of 17.45 cents per kWh, charging an electric car at home would cost about $59 per month. However, at a public fast-charging station, you could pay 50 cents per kWh, or about $169 a month. That means if you live in an apartment and can’t plug in at home, you could be paying more to power your EV than you would for a gas car.
Also consider this from the Edmunds report: The current car market is vastly different from the last time we saw a major gas spike. In 2022, after Russia’s invasion of Ukraine, high prices at the pump drove some people to trade in their cars for more efficient ones.
However, the math has changed considerably for current shoppers. The average price for a new car has risen from $45,596 to $48,766. The average interest rate has jumped from 4.4 percent to just under 7 percent, pushing up monthly auto loan payments, Edmunds notes.
Before you panic-buy a more fuel-efficient car, ask yourself: Is the monthly savings worth a new five-figure loan over five, six or even seven years?
Don’t conflate efficiency with affordability. A car that gets great gas mileage but carries a monthly payment of $700 or more can easily wreck your budget for years. Paying less at the pump doesn’t help much if you’re stuck with an expensive car loan that outpaces the savings you were chasing.
I support efforts to go green, but be careful that it doesn’t put you in the red.
The post Why $4 gas isn’t enough reason to buy a new car right now appeared first on Washington Post.
