Should you buy a new car? No. I mean, NO!

Closeup of car engine

Usually when I am asked by friends if they should buy a new car, my knee-jerk response is, no.

Well, it's more like, NO!

Occasionally, if the pile of junk they are driving is particularly appalling, I might ask for more details and modify my advice as a result, but that's only in extreme situations.

My advice: Drive it until the wheels fall off.

I am convinced you are better off patching and fixing your rust bucket, as pathetic as it might be, than you are taking on new debt.

Here's why:

If your vehicle is paid for, it's a no-brainer.

You simply need to consider whether it will it cost you more to keep your heap running than it would cost to replace it with something new.

According to the national credit reporting agency Experian, the average monthly payment on a new-car loan in the first quarter of 2011 was $460. Yours might be more or less, but that was the average.

Let's say you own a 2000 Dodge Grand Caravan free and clear. According to Repairpal.com, you could replace the alternator, air-conditioning compressor and catalytic convertor for less than six months of average payments.

Yes, it's a gamble betting that your monthly repair costs won't exceed the monthly new-car payment, but you can get a lot of stuff fixed before overtaking the $5,520 you would spend on loan payments in a year.

One negative is that you would have to do without your car while it's being repaired. But another positive is that you'd be paying less to insure your used car than a new one.

Still owe money on your current car?

It makes no sense to buy a new car if you are upside down on your current auto loan.

You must either come up with more cash out of your pocket to put down, or you have to roll the negative equity into your new loan, which just isn't smart business.

It's tough enough to gain equity in a car without being down an extra few thousand.

Even if you are down to the last 12 payments on your current loan with some equity, it would probably be far cheaper to absorb some out-of-warranty repairs than to commit yourself to another 48 or 60 months of $460 payments.

There are no absolutes, but my knee-jerk response is still, no.

Follow Interest.com on Twitter.