Some auto repair shops look at older vehicles as cash cows. They know that the longer they keep the vehicle limping along, the longer the owner will pump money into their coffers. We’re different. We don’t accept new clients with older-than-15-year vehicles for many reasons, but maybe the biggest is that it’s so rarely in the client’s interest to spend money on vehicles near the end of their service life. Our clients appreciate our advice when it makes sense to spend hard-earned money on an older vehicle or when it makes sense to spend it on a replacement. There are other shops out there with this same philosophy, and we ran across an article in Motor Magazine that explains the idea in detail. It’s a long article and we may differ a little with some of their specifics, but it’s got some great information if you’re in this position and it’s an interesting look at how other shops approach this issue…
When to pull the plug on an older vehicle
Sam Bell in Motor Magazine, February, 2015
With the possible exception of Aunt Tillie’s fruitcake, everything falls apart over time. Clocks wind down, tires wear out, seals and skin lose their elasticity. The universal tendency towards increasing entropy (enshrined as the Second Law of Thermodynamics) in fact provides the basis for all maintenance work.
Automobiles are by no means immune from wear, as we well know. In popular parlance, they can embody the good, the bad and the ugly.
The Good.
The average age of the U.S. passenger vehicle fleet is at about 11.4 years. When you stop to think about what that really means, you soon realize that there must be an awful lot of 20+ year-old cars on the road to counterbalance all the newer ones. With 252.7 million light vehicles in service, about 125 million must date from 2003 or before. Given 2014 sales figures expected to total around 17.5 million vehicles, you’d have to figure that there are probably 10 million or more dating from 1991 alone. Since there were only 12.8 million 1991 models sold, the vast majority must still be on the road. If older cars are seen at somewhat higher rates, as might be expected, the new record size of the fleet and its high average age should keep us all busy for quite some time.
The Bad.
“Dig out your platform shoes and the revolving ceiling light, Boss,” said my parts manager, “Your part’s a disco.”
“Hey, it’s a ’96 F-150,” I replied. “It ought to be supported for a while more.”
But, sadly, the fuel pressure regulator is no longer supplied by Ford. Fortunately, there are acceptable aftermarket alternatives available in this case, but OEM-level parts do become increasingly hard to find with time. In some cases, aftermarket substitutions are not sufficiently engineered to keep a Check Engine light off, for instance, although they may appear to fit perfectly well. In this particular case, the fuel pressure is regulated at 50 to 60 psi KOEO, not the more common 40 to 45 psi, which will always result in P0171 and P0174 lean codes. With an aging fleet, such issues become more and more frequent.
The Ugly.
Here in the Salt Belt of the upper Midwest, it’s the ugly that shows up most. While replacing brake and fuel lines is messy, and at least modestly expensive, deterioration of subframes and unibody structures is often a game-ender (see the photo below). The sad truth is that salt + water + iron or steel + goop = rust. And not just a garden variety of rust: an endemic, metastasizing rust.
The road salt used in my area has been treated with an acid gel to keep it pelletized! It’s often spread on top of a layer of “molasses,” actually a beet-juice byproduct which functions as a glue to hold the salt first on the road, and then, once dislodged by your tire, to the undercarriage of your car. Yep, you read that right: acid and glue, because salt alone isn’t harmful enough.
The Four Horsemen
From an auto-centric point of view, the four horsemen of the apocalypse might as well be named flood, fire, lightning and crash. It’s not that you can’t possibly fix cars that have been hit by one of these causes; of course you can. Eventually, if money and time are no object. While a flood car, for example, might make a decent side project to keep you busy during lean times, it doesn’t usually make sense from a car owner’s standpoint.
There are strong reasons why most insurance companies will simply write off any vehicle hit by one of the first three of these horsemen as a total loss. First and foremost, there’s the issue of repairability in a timely manner. While you can usually succeed eventually, the insurance company doesn’t want to undertake the expense of a long-term rental. Nor do they wish to risk the possibility that the vehicle will have to be reworked at some future date to fix latent damage that may manifest itself later. For example, a small amount of saltwater intrusion into a wiring harness may cause no problem for a long time, but may eventually result in well-hidden corrosion in the harness, potentially causing or exacerbating future failures.
Secondly, there’s the issue of customer satisfaction. People can and do change insurance companies, and are much more likely to do so when they feel that the insurance company has failed to warn them adequately about the advisability of repair.
As to crash, the last of our four horsemen, the questions are somewhat more straightforward and familiar, although they vary considerably from state to state. Before undertaking repairs on crash-damaged vehicles, you have to ask whether it’s a smart move or not. Don’t forget to check your shop’s insurance policy as well; many policies exclude coverage for any repair undertaken on a vehicle with a salvage title. You may also want to consider what impact, if any, your willingness to undertake repairs in such a circumstance might have on your reputation, whether for good or for ill.
There are shops that successfully repair cars that have been subjected to one or another of these calamities. Most of them have paid the price of a relatively steep learning curve, and very few of them offer such services on a direct consumer basis. Most either use such vehicles as long-term projects to be completed during any slow times, or they seek out salvageable cars for eventual resale. This is a viable business model, but is best suited to those who are comfortable with a certain degree of risk and unpredictability.
‘Just Another 6 Months . . .’
We’ve all heard that before. Often again and again from the same customer about the same car! The fact is that, with very few exceptions (graduation from college, relocation to another city, entering military service, maybe marriage or kids) nothing is likely to be noticeably different in six months. The reality is that most folks are not likely to experience large changes of financial circumstances absent one of the significant life events listed above, or possibly a career change event. So, how should you respond? Let’s look at a few scenarios.
Allen’s dad gave him his old Audi AllRoad with 175,000 miles on the clock. He had it flatbedded to the shop when he found the fenders rubbing the tires. Somehow, he didn’t connect that with the air-suspension warning light; after all, it had been on for a few months now. Besides a leak in the right front air spring, and likely as not because of that leak, the suspension pump itself has now given up the ghost.
He also has a MIL on with both P0420 and P0430 codes, the oil is overdue, and likely not the right lube anyway. Not that you could tell, because, after all, that would mean there was at least enough of it left to touch the bottom of the dipstick. He just needs it to last another six months until he graduates from college, but the registration expires in two months and he cannot renew his tags with the MIL on.
The vehicle is structurally sound, though it has a few minor cosmetic blemishes and one of the fenders is a little crunched from a run-in with a snow bank. The Kelley Blue Book trade-in value for this car is between $2000 and $3200 (on a generous day).
If it needs both converters, factory units are about $1300 each, plus definitive diagnosis, installation and tax. Labor for the R&R alone books out at 6.3 hours. If the cats died because of the oil consumption issue, there will be motor work required to make the fix stick. You’ll spend close to a full day overhauling the suspension, including updating the pump per the TSB and doing an alignment.
No matter how you slice it, Allen needs to spend a lot of money to put this car back on the road and keep it there. But there are several ways to look at it. The car is currently worth about $2000 (X), comparable to the salvage value used in TLF calculations by insurance companies. It needs about $1900 (Y) of immediate repairs to fix the suspension and change the oil. If those repairs are made, the car will likely be usable for two months (Z) before the next substantial repairs are needed. (Be realistic, not optimistic!) If repaired, the car might be worth about $2500 (M)—similar to insurers’ ACV. A better used car will cost at least $5000 (N).
Questions: Is M > X? Is M > X 1 Y? (Looks a lot like the TLF formula, doesn’t it?) Are the monthly payments on (N 2 X) less than Y / Z? (Y / Z is the amount per month of the currently needed repairs apportioned over the time until the next major repair; (N 2 X) is the net cost of a better used car after trade-in.)
Are the monthly payments on N 2 (X 1 Y) less than Y / Z? This essentially adds the repair costs and the trade-in together as a down payment on the better used car, then compares that to the situation of repairing the current car and apportioning those costs only until the next major repair.
Let’s see how those numbers play out:
Yes, M is greater than X ($2500 > $2000); that is, fixing the suspension does increase the value of the car. Many repairs will not increase the value at all, but may still make sense anyway.
M is not greater than X 1 Y ($2500 < $3900); that is, fixing the suspension costs more than the immediate monetary value it adds. This is often the case, but could be offset by factors such as extended useful life.
N 2 X ($5000 2 $2000) 5 $3000. This is the figure for the net cost of a better car after trade-in.
When we calculate the monthly payments on the immediately needed $1900 in repairs, we have to ask over how long a period of time? We decided earlier that it wouldn’t make sense to extend this beyond the time horizon until the next reasonably foreseeable major repair. Here, we run right up against the two-month window on the MIL repairs. Y / Z 5 $1900 / 2 5 $950 a month, plus interest. Ouch.
If we add the current value (X) and the immediate repair cost (Y) together, we get $3900. If we subtract that from the cost of a new-to-him used car, Allen comes out only $1100 shy: N 2 (X 1 Y) 5 $5000 2 $3900 5 $1100.
If Allen’s new used car will go six months without needing major repairs, and we again apportion it all to that time period, he’ll be financing the N 2 X amount ($3000) over six months, for $500 a month plus interest.
You may want to recalculate that one after allocating a residual trade-in value R to his new used car at the six-month mark (Zr). If we made that figure a reasonable $3500, we could recalculate his monthly costs as [(N 2 X) 2 R] / Zr 5 [($5000 2 $2000) 2 $3500] / 6 5 minus $500 / 6 months, or a paper gain of about $80 a month. Note, however, that here we’re talking about net cost rather than monthly payments. The actual cash position still has Allen trading the Audi up front, then paying out $500 a month for six months, then selling his “new” used car for $3500 and walking away. Compared with selling the Audi for $2000 today and walking away, the six months use of his “new” car has cost him the Audi and the $3000 in loan payments, but leaves him walking away with $3500. This works out to a net cost of $1500, representing the Audi’s original trade value minus the $500 “gain” on the new-to-him used car. Over six months, his eventual net cost per month comes to $250. This may be his best play.
Finally, what would we be looking at if Allen decided to fix his Audi all at once instead of piecemeal? Of course, some of the pieces remain the same: X is still $2000, but Y increases to about $5200. As compensation for spending that extra money, the time frame (Z) increases to 18 months, and the repaired residual value (M) probably hits $3000.
Even though paying $5200 to bring the car’s value up to $3000 looks pretty foolish on the face of it (M is greater than X, but still nowhere near greater than X 1 Y), the extra months may turn things around. Let’s see.
$5200 spread over 18 months is about $290/month out-of-pocket—again, plus interest. (Because the residual value will probably be about the same as the present in 18 months’ time, we could calculate the cost of repair at about $180/month.)
Once again we have to figure in the effect of Allen’s self-proclaimed six-month time frame. If he could finance the repairs at that $290/month level (plus interest), and he really does sell the car after six months, he’ll be out-of-pocket “only” about $1740 (plus interest) on the monthly payments, and he should be able to get close to $3000 from the new buyer. So, since $5200 2 $3000 is $2200, he’ll be in the hole only about $460 once he sells the Audi off.
The recap: To fix everything on the Audi and sell it in six months will cost him $2200 plus whatever interest, origination fees, etc., are associated with the transaction. That’s an overall net cost of repair of about $370/month. The math doesn’t recommend this course of action, no matter how we slice it.
What if we change it up a bit? Let’s look at a nearly identical scenario.
Craig has the same car as Allen, with the same problems, but he just passed the emissions test a month ago, so his tags won’t need to be renewed for another 23 months. The suspension fix (Y) is still about $1900, but the time frame until the next reasonably foreseeable necessary major repair (Z) is now 23 months—assuming, of course, that the engine’s thirst for oil doesn’t bring things to a halt prematurely.
If, as before, we allocate the repair dollars across the entire time (Y / Z), we’re looking at a very different figure: $1900 over 23 months is less than $85 a month—again, plus interest. And what happens if Craig sells the car after six months? He’ll have paid back about $500 on the loan. If he gets $2500 from the sale, he’ll still owe only about $1400 on the loan, leaving him with $1100 in his pocket.
Let’s go back to Allen for a moment. The difference between our analyses of Craig’s situation and Allen’s clearly hinges on the converter question. This should prompt us to ask whether Allen should spend money now to pin down the diagnosis. For example, it could turn out that his DTCs stem from faulty oxygen sensors, or even from exhaust leaks that aren’t particularly obvious at idle in the shop (see the top right photo on page 16 for an example). Sometimes, in order to help our customers arrive at the correct decision, they’ll have to spend some money with us. I hope that you would already have gotten an authorization before doing the diagnostics on the air suspension system in this example. Yours, like many shops, may have read the powertrain DTCs at no additional charge, but you should go no further without getting paid to pinpoint their causes (see “Santa Gets You Paid,” on page 18).
Jane just bought her truck a month ago, and intends to use it for her urban farm. It’s a 15-year-old F-150. The fenders are Swiss cheese, and when you lift it on a twin-post hoist, you see the right front wheel droop oddly. Closer inspection reveals that the frame has rusted through completely in that area. You can try doing the same analysis as before, but the reality is that you should stop here; rust severe enough to cause complete frame separation cannot be safely repaired. Even though you might be able to box in a new section of frame, you cannot count on finding another section strong enough to which to anchor it. And even if you did find a spot from which to work, ask yourself these questions:
•How will the repaired section compare to the original frame in the event of an accident?
•Will it be able to absorb an equivalent amount of energy?
•Will it be able to redirect impact forces using the same vectors as the original?
•How good is your insurance? Will it protect you adequately in the event of a lawsuit by Jane and her passengers (or their estates) in the event that your repair does not hold up in a serious accident?
It’s better, by far, to draw the line. The lesson for Jane to learn is that she should have her next truck inspected before she buys it, not the other way around.
Claire’s car is a ’99 Accord V6 with the MIL on and current codes P0141 (O2 sensor heater circuit malfunction) and P0401 (insufficient EGR flow). There’s a TSB for an update on the EGR system. As far as anyone knows, the update has never been done. The rear brake calipers are bound up and need to be replaced, along with the rear pads and rotors. Her car has 260,000 miles on the odometer. The timing belt has been changed at the scheduled 105,000 mileage intervals, most recently at 210,000 about four years ago. The car is from Georgia and is rust-free. The radiator has a slow leak from the lower tank seam.
In good condition, the Audi is worth about $1500 as a trade, or about $2300 on the open market. Making the needed repairs won’t materially affect the car’s value. Flat-rate for the EGR update is 1.5 hours. The required parts kit retails out for about $150. The rear O2 sensor lists for about the same, if that turns out to be the source of the P0141 DTC. Labor for the R&R is another .5 hour or so, on top of any additional diagnostics. The rear brake job adds another $650 or so, the radiator another $500, plus tax on everything. Call it $1800 as a round number, and that doesn’t factor in new hoses, clamps or thermostat, all of which would be strongly recommended at this age and mileage.
If this car were in an accident and cost a similar amount to fix, would an insurance company pay to fix it, or would it pull the plug? What should Claire do? Before we can analyze her situation as we did Allen’s and Craig’s, we need to define a time frame for the likelihood of future major repairs. We can look to past experience, failure frequency data or reports (iATN, Identifix, various user groups, etc.) and our best judgment when trying to predict the future. However, there will be times when our best forecasts will, like our local meteorologist’s, leave us waking up to two fluffy inches of partly cloudy.
So, what does the weatherman do? He assigns a probability to each element of his forecast. For instance, using Allen’s situation as an example once again, we might assign a probability (say 75%) to his Audi’s likelihood of needing both catalytic converters. In Claire’s case, we know she’ll be due for another timing belt and water pump combo in about 55,000 miles, probably about three and a half years from now. There’s also a fairly good chance, say 25%, that some other major repair, such as a transmission failure, for example, may crop up during that interval. Once we assign a probability to that potential future failure, we can use it to decrease the projected time until the next repair by a similar amount. So in this example, we would project the next likely repair at about two and a half years, roughly 75% of our earlier time frame.
Spending $1800 won’t increase the value of Claire’s car, but it does extend its useful life. Could Claire buy another 30 months of use for less than $1800? That works out to about $60 a month. Here’s a case where the best question may be, Could she get a better used car by trading hers in and adding the $1800 on top? My guess is that she couldn’t, but it’s a decision she ought to make consciously and with full knowledge of all the known facts and of the reasonably foreseeable risks.
Up the Technology
Just to add one more factor to the mix, somewhere along the way we need to take automotive evolution into account. In general, at least within similar market segments (luxury, economy, etc.), newer cars tend to be safer, more economical and more reliable. The underlying enabling technologies range from ever more advanced air bags to vehicle stability control and active safety systems. For example, if an old vehicle is not equipped with ABS, an upgrade to a newer model with that feature may offer more long-term value to your customer.
On the flip side, an older Mercedes S-Class, for example, may contain more advanced systems than a somewhat newer used Ford Focus. Either way, it’s up to you to help your customers make the best decision by pointing out any significant change in technology levels between two alternative choices.
Differences in projected operating costs should also be factored in. A newer vehicle with large-diameter, low-profile tires and a V6 engine might well be considerably more expensive to operate (and insure) than an older one with less stylish wheels and an inline 4-cylinder engine.
One more thing: As I said earlier, it’s up to you to prepare your customer for the possibility that his or her vehicle may not be on the one-day-turnaround list. You’re going to make your money on this visit today from your inspection and consultation. This is also the time to presell your services on a future prepurchase inspection. Don’t be shy about charging for it, but do make sure it’s a complete and thorough job. You don’t want your customer saying six months from now that you led him astray and made him buy a used lemon when he should have fixed his old jalopy.
Decisions regarding major repairs require careful analysis. Proper planning and presentation on your part can assure that your interests and your customer’s interests are aligned. Careful and thorough assessments, both of current conditions and of upcoming maintenance and repair needs, require competent inspection, experience and diagnosis, for which you should charge accordingly. A candid and complete report of your findings provides a starting point for financial analysis.
Your care and guidance through the decision-making process form a strong foundation for long-term win/win customer relationships. Step-by-step and side-by-side cost comparisons can help your customer evaluate potential alternative plans to reach a rational decision.
