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How to Pay for Car Repairs

Matthew Levy Updated: August 3, 2023 • 6 min read
car repairs

Cars can break down and need repairs at times when you least expect it. What's more, auto repairs have become more expensive in the current economy – largely due to labor and materials shortages. According to AAA, the average auto repair bill comes in at $500 - $600. Understanding different financing strategies for how to pay to fix your car becomes crucial. There are several options available, so you can get back on the road without emptying your pockets.

Solutions for Paying for Car Repairs

Several practical solutions can help you manage these costs of car repairs without throwing your budget into disarray. Let's look into the options, understand how they work, their pros and cons, and help you make a more informed decision about your car repair financing.

1. Emergency Fund or Cash

An emergency fund is a stash of money you set aside to cover unexpected expenses, such as a job loss, medical emergency, or car repair. The clear benefit here is that you're using your own money, so you won't incur any interest charges or fees. But there's a drawback too. Depending on the cost of the repair, you might deplete your emergency fund. If another unexpected expense arises, you may find yourself in a tricky spot.

2. Auto Repair Shop Payment Plans

Many repair shops understand that car repairs can be a significant outlay and offer payment plans. This lets you spread the cost over a period, often without interest, if you pay within a set timeframe. The benefit is that these plans can help make a hefty repair bill more manageable.

However, there's a catch. Not all repair shops offer this, and those that do may require a credit score check. Plus, if you don't pay off the balance within the agreed period, you could end up paying more due to interest or fees.

3. Personal Loans

Personal loans are another option to pay for car repairs. They can be useful when the repair cost is high, and you need a more extensive repayment period. One advantage is that personal loans generally offer lower interest rates than credit cards, especially if you have a good credit score. Plus, you have a fixed repayment schedule, making budgeting easier.

The downside? Applying for a personal loan can affect your credit score, and if you fail to repay, you risk damaging your credit history. Also, remember that the loan cost includes not just the interest but any potential fees. As of June 2023, Lendstart estimates that the best personal loan rates are anywhere from 7% to 36%, depending on the vehicle used and your credit rating. 

  • Fixed APR: 6.99 - 35.99%
  • Loan Term: 12-84 months
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  • APR: 8.99-25.81%
  • Loan Term: 24-84 months
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  • APR: 5.99-35.99%
  • Loan Term: 3-72 months
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4. Credit Cards

If you have a credit card with a high enough limit, you might consider using it to pay for car repairs. If your card offers cash back rewards, it could be an additional perk. However, credit card interest rates tend to be high, and if you can't pay off the balance quickly, you might find yourself paying much more in the long run due to accumulated interest. It's also worth noting that carrying a high balance can impact your credit utilization ratio, negatively affecting your credit score. The average credit card rate as of June 2023 is now at a record high of 20.69%, according to CNBC.

5. Insurance

Certain types of car insurance policies or extended warranties might cover certain auto repair costs. This can significantly reduce your out-of-pocket expense. On the positive side, if your repair is covered, you could end up paying a fraction of the total cost. However, the downside is that not all repairs are covered. Routine wear and tear, for example, is typically not included. Furthermore, you'll likely have to pay a deductible, and making a claim may increase your future insurance premiums.

Each car repair financing method comes with its own set of advantages and potential downsides. What might work best for one person might not be the best fit for another. It's important to remember that your financial situation is unique, as are the circumstances surrounding car repairs. The urgency and cost of the repairs and the terms and conditions of each financing option can vary significantly. That's why it's critical to take the time to evaluate your own financial situation, explore all options available to you, and weigh the potential impact of each before making a decision. Remember, the goal is not just to get your car fixed but to do so in a way that makes the most financial sense for you.

Setting up an Emergency Auto Repair Fund

Navigating car repairs is a fact of life for most vehicle owners, but it's much less stressful if you're financially prepared. It's always a good idea to set up an emergency auto repair fund to cover any unexpected costs that may arise. Here's how:

  1. Determine the amount: Calculate an average yearly maintenance cost for your vehicle. Consider including additional buffer for unexpected repairs. According to AAA, the average car owner spends $792 per year or $66 a month on car repairs.
  2. Set up an emergency fund: Opening a separate savings account can prevent you from using your savings for day-to-day expenses. And, in the current high interest rate environment, many online providers and banks are offering great interest rates on high-yield savings accounts. 
  3. Contribute regularly: Even small, consistent contributions can quickly add up. Read more here: How to Start Saving Now

In addition to financial preparation, ongoing maintenance like regular oil changes, brake inspections, and tire rotations can prevent bigger, costlier issues down the line. After all, prevention is always better and can prevent damage. 


Owning a car brings with it unexpected repair costs, and these can be significant, especially with today's rising repair costs. However, you can mitigate the financial impact by considering various options: using cash from an emergency fund, setting up payment plans with the repair shop, opting for personal loans, leveraging credit cards, or relying on insurance. Each option has its unique benefits and drawbacks, and what works best for you depends on your financial situation and the specifics of the repair needed. Furthermore, by setting up an emergency repair fund and maintaining regular car care, you can be better prepared for any surprises that come your way. The aim is not just to get your car back on the road but to do so in a manner that doesn't derail your financial well-being.


1. Can I use a personal loan to pay for auto repairs?

Yes, you can use a personal loan to cover auto repair costs. Personal loans are a common method of financing car repairs, as they typically offer lower interest rates compared to credit cards and provide you with a fixed repayment schedule. However, remember to consider the interest and repayment terms before deciding.

2. Is it cheaper to buy a new car than to pay for auto repairs?

The answer to this question depends on the specifics of your situation. Consider the repair costs, the age and condition of your car, its overall value, and how much longer it might last post-repair. If repair costs exceed the car's value or continue to rise, purchasing a new or used vehicle might be a better choice. Always evaluate all your options and consider seeking professional advice before deciding.

3. What type of repairs does auto insurance cover?

Auto insurance coverage varies greatly, depending on your specific policy. Typically, car insurance covers repairs necessary after an accident, weather damage, or vandalism. Routine maintenance and wear-and-tear repairs, like brake replacements or oil changes, are usually not covered. However, extended warranties or mechanical breakdown insurance can cover more types of repairs. Check your policy or speak with your insurance provider for exact details.

Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.