Trade-in Time?

QUESTION 1: Are the repair bills adding up?

A little here, a little there. Just because you don't like the coffee at the repair shop lounge doesn't mean you have a good reason to trade in your car. "One or two little things may go wrong, but don't think that the car is done," Reed says. "You may have to fix a number of things, then it'll be clear sailing for two or three years." Such small, common repairs may include imbalanced or misaligned wheels, a weak battery, or worn tires. Often, the cost of such repairs would be less than one month's payment on a new car.

Yikes! The last repair cost more than the car is worth! When a repair costs more than the value of a car, people often think it's time to trade in. But Reed suggests weighing the cost of the repair against how much longer the car will last and comparing that to car payments, taxes, and registration fees. For example, a $4,000 repair to make your car last another year actually saves you money, compared with the $7,500 you'd pay for a year of $500-a-month car payments and $1,500 in taxes and fees.

No—so far so good. Congratulations. To keep your car rolling, continue regular maintenance and do small fixes yourself, Reed recommends. "We're in an age where the dependability of cars is phenomenal," Reed says. "It used to be that when a car reached 100,000 miles it was done. But now people are buying used cars with 100,000 miles and they last for years."

QUESTION 2: Is your current car safe enough?

I think so, but a few more air bags might be nice. Each year, cars become safer and safer. With manufacturing advances come stronger frames and more protective crumple zones. And some added safety features, like an antilock braking system, have become standard on many cars. So if you're considering buying a new car, compare such safety features on your old car and the prospective new one.

I feel safe, but I drive in some crazy rush-hour traffic. Reed suggests evaluating the type and amount of driving you do. If your daily commute is through intense traffic, safety—and the features of a newer car—become more important. "When thinking about buying a new car, put safety at the top of your list," Reed says. "Older cars are not as safe."

QUESTION 3: Is your car keeping up with your lifestyle?

Nope—must have the latest and greatest gadgets. To justify the cost of a new car, you might want to see where your old car is at value-wise. Once it's over five years old or tops 75,000 miles, it starts to lose significant value. Trading it in during the sweet spot between two and five years old will get you the best deal at trade-in—and more of those high-tech features in a new car.

No, because we just had a baby. If your family has expanded, then a coupe might not be the best vehicle. However, Reed says that just because you have a new addition doesn't mean you have to automatically trade in and jump into the minivan set. Try out your old car with car seats—and all passengers—in place to see if it's still workable. (Remember, infant seats need to face the back, which can impact front-passenger leg room, as well as the recline range of the front seats.)

I really have no idea. To figure out whether you should buy a new car or are simply chasing those spiffy new features, first look in the mirror. "The best way to gauge all of these arguments is to be very realistic and determine what you need versus what you want," Reed advises. "What's motivating your decision?"