Should you fix up or break up with your car?

Should you fix up or break up with your car?

By Philip Reed


You’re looking at a $1,200 repair estimate for your ailing car when an ad catches your eye: a brand new set of wheels for a mere $450 a month.

At first, dumping your old car might seem like a no-brainer and you can’t help picturing how good you would look in that new car. But automotive experts say you’ll almost always come out ahead at least financially by fixing old faithful. There are, however, other important considerations when deciding whether it’s time to say farewell.


“Even though the repair cost might hurt, you really have to think about buying a new car as a tremendously more expensive proposition,” says Jim Manelis, head of direct lending for Chase Auto Finance.

At the very least, for a reliable used car, expect to spend a minimum of $2,000, plus tax and registration fees, says Mark Holthoff, editor at, a community website for used car enthusiasts. Depending on the severity of your car’s problems, “You can buy a lot of repairs for that kind of money,” Holthoff says.

Of course, there does come a point when it isn’t worth pouring money into a beater.


“Start with the scale of the repair,” Manelis says. “Is it a $1,200 fix or is it a $5,000 fix?” Then, look up the current value of your car using an online pricing guide like Kelley Blue Book.

When repair costs start to exceed the vehicle’s value or one year’s worth of monthly payments on a replacement, it’s time to break up with your car, according to automotive site Edmunds and Consumer Reports, the product review site. As an example, say you’ve already spent $1,500 on repairs and now need a new engine for $3,500, and instead you could get a new or more reliable used car for $400 a month ($4,800 a year).

Beyond repair costs, Consumer Reports says to factor into your decision the savings from a new car with better fuel efficiency and the new car’s loss in value over time. Manelis also suggests thinking about your current car after repairs. Once it’s fixed up, what will it be worth and how long will it continue to run reliably?

To help answer the question of fixing a car or buying a new one, do a cost-per-mile comparison with the “Fix-it or Trade-it” calculator created by the Automatic Transmission Rebuilders Association.

However, Ron Montoya, senior consumer advice editor at Edmunds, says there’s another equally important consideration: peace of mind. “If breakdowns become frequent and you feel unsafe on the road, that’s the time to replace it.”


To make the best decision for your situation, consider the pros and cons of both options.


_ Faster than shopping for and buying a new vehicle.

_ No change in insurance costs.

_ The car’s history is known.

_ You won’t waste time and money advertising and selling your car.

_ But your repaired car might soon need more repairs.


_ Purchase can include warranties and sometimes maintenance.

_ Recent cars have advanced safety features.

_ Younger cars are more reliable.

_ You’ll stop wasting time schlepping to the repair garage.

_ But a new car loan is a long-term financial commitment.


“It’s imperative to have a mechanic that you trust” before you move forward with any repairs, Holthoff says. For example, the service department at a dealership might be more interested in frightening you with repair bills to get you to buy a new car.

Once the car is purring again, Holthoff says to continue driving it long enough to make up for the cost of the repairs. Later, if you decide to sell, you can do so with confidence once the car proves itself reliable again, and you’ve reaped the benefit of the repairs.


Even if you decide to part ways with your car, you’ll have to get it running again or sell it as-is for less money. If you can, make the repairs, then repay yourself after you sell the car.

“Honesty is the best policy,” Manelis says about selling a car with issues. Get an estimate for repairs and show that to a prospective buyer, then tell them you’re willing to reduce the price of the car by the amount to fix it.


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My leased car was in an accident. Do I have to keep making payments?

My leased car was in an accident. Do I have to keep making payments?


Within a month of taking possession of my car on lease, it was in an accident. I informed the insurer and the car company within hours – but I am shocked to see that Canadian Dealer Lease Services is still deducting payments from my account. When contacted, it informed me that the lease is active and it will keep deducting payments. Is this correct practice? I don’t have a car now. – Samuel

After a crash, payments don’t stop just because your car can’t go.

If your car is in the repair shop, you have to keep paying your financing or lease payments until it’s fixed and you can drive it again.

In other words, it’s not your bank’s or finance company’s problem – you’re the one dealing with the insurance company. If your policy allows it, you might get a rental car.

“In the case of vehicle damage, the consumer who has taken out the policy would submit a claim to fix the vehicle,” said Pete Karageorgos, Ontario director of consumer and industry relations with the Insurance Bureau of Canada (IBC), in an e-mail. “There may be coverage for renting a vehicle while the owner’s vehicle is being repaired – the owner’s insurance policy would extend to cover the rental vehicle.”

Total responsibility?

And if the crash totals your car? You’ll keep making normal lease payments until the claim is settled.

“Lease payments will continue from the date of loss until Canadian Dealer Lease Services receives the agreed settlement cheque from the insurance company,” said Andre Safah, manager, client services with Canadian Dealers Lease Services, in an e-mail. “At that point, all lease payments that were paid after the date of loss will be refunded to the lessee less any deductible amount under the policy and no further payments will be deducted.”

After the settlement, the leasing company might consider it case closed.

“We will accept the proceeds of insurance, provided there is no denial of coverage in whole or in part and the lessee is not in default in paying any amount due to us,” Safah said.

But you could end up owing money after the settlement, depending on your lease or loan agreement.

“Usually, your insurance company will pay your lease financing company the market value of the vehicle directly,” Lynne Santerre, spokeswoman with the Financial Consumer Agency of Canada, said in an e-mail. “If the insurance payout is less than the amount you owe on your car lease, then you are responsible for paying that difference.”

For example, if your insurance company decides the replacement value of your car is $10,000 but you still owe $16,000 on your loan or lease, you’d have to cover the $6,000 shortfall, Santerre said.

“GAP (Guaranteed Auto Protection) insurance will usually cover this difference and pay the remaining balance you still owe on your lease,” Santerre said. “Many finance companies require GAP insurance as part of the lease, while others offer it as an option.”

Lease of your worries?

When leasing or financing a vehicle, read through the agreement so you can understand what you’re responsible for, Karageorgos said.

“If leased or financed, the name of the leasing or financing company would be included on the application for insurance and on the policy as having an interest in the vehicle,” he said.

“Your obligations could include everything from mileage to condition of the vehicle at the end of the lease period, and possibly specifications as to how repairs to the vehicle are completed following a crash.”

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New Case: ON Coverage Laws Limited If MVA In BC

Article by Laura Emmett

On April 10, 2018, the Divisional Court released an important decision regarding ATV incidents outside of Ontario. Specifically, in Benson v. Belair Insurance Co. Inc., the Divisional Court considered whether the Claimant was entitled to statutory accident benefits arising from an incident while in British Columbia.

Mr. Benson was a resident of Ontario who had been living in British Columbia. He was injured after he fell from an ATV that was being driven on a public trail owned and occupied by the Northern Rockies Regional Municipality. The ATV was owned by a resident of British Columbia. Since there was no requirement that the ATV be insured in British Columbia, it was not.

At the time of the accident, Mr. Benson had his own insurance policy with Belair in Ontario. The policy was a standard OAP-1 that did not include coverage for any ATVs.

The Claimant applied under his own insurance policy for accident benefits. The Insurer denied coverage because the ATV was not an “automobile” within the meaning of the Statutory Accident Benefits Schedule – Effective September 1, 2010. The Claimant filed a dispute with the Financial Services Commission of Ontario. The Arbitrator found that the ATV was not an automobile. While the Claimant appealed the finding, the Director’s Delegate dismissed the appeal.

On Judicial Review, the Divisional Court noted that the question to be determined was whether an ATV that was owned, registered and operated in British Columbia was an automobile covered by the Ontario SABS.

The Divisional Court held that the appropriate legislation to be applied was the legislation in British Columbia. The ATV was operated and the accident happened in British Columbia. The decision to have, or not to have, insurance for this vehicle was made in British Columbia. As a result, British Columbia legislation must determine whether there is entitlement to benefits resulting from the accident.

Reference was made to the Court of Appeal’s decision in Adams v. Pineland Amusement Ltd. (2007 ONCA 844) which found that in determining a case of liability insurance, “the proper question is whether the vehicle [involved in the accident] required motor vehicle insurance at the time and in the circumstances of the incident.” Applying this question in the present case, at the time and in the circumstances of this accident, the ATV was not insured.

The Divisional Court also held that there was no basis to claim that Mr. Benson had a legitimate expectation that Belair would cover an accident involving ATVs as there were no ATVs listed on the subject insurance policy.

The last issue considered by the Divisional Court was the Ontario Off-Road Vehicle Act which stated that “no person shall drive an off-road vehicle unless it is insured under a motor vehicle liability policy” under the Ontario Insurance Act. The Divisional Court concluded that it was reasonable to assume that the provision only required this of ATVs in Ontario, not ATVs in British Columbia.

This decision is of assistance to insurers who are presented with claims outside of Ontario. It is clear that in determining whether the vehicle is an “automobile” within the meaning of the SABS, the trier of fact will consider the applicable law in the jurisdiction where the incident occurred; not the law in Ontario. A word of caution, however, the Divisional Court has left the door open for another party to argue that there was an expectation that the vehicle they were operating was an “automobile” under the SABS. This limited exception is only where a similar vehicle was listed on their own Ontario insurance policy.

See Austin Benson v. Belair Insurance Co. Inc., 2018 ONSC 2297 (CanLII)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

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