I hear that a lot and it just is not true, at least over here. Mechanically speaking, it always makes sense to fix a car up because the cost of repair is so cheap compared to making monthly payments.
I always pay cash for my cars anyway, but in doing the math on my current car it is easy to see why I am doing so well with it. I paid $7000 for it and repairs have cost me $4800 over the 4 years I have owned it. That means the car has cost me $11,800. If I was making payments on a new car, just the payments alone would have been $24,000. In 4 years I have saved $12,200 and my car is still in excellent mechanical shape meaning I have more years left of lief on it. I could put in a new engine or transmission, extend the life of the car by several more years, and still be WAY AHEAD of what a new car would cost.
But that is mechanically speaking. What kills cars where I live is rust.
But here is where paying cash for older cars really pays off. My car costs me $58 dollars per week in repairs which I also put in $35 a week in gas. So for roughly putting in $100 per week, I net a paycheck of $1800 per week. That is a return on investment of 1700%!! Where the heck could I ever get that kind of return on any other investment. My stock investments average 11% most year and I am lucky to get that, and my real estate nets me 12% per year on average, so as much as people bemoan and wish they could retire, the truth is having a car and going to work will net a person the most possible money for the least outlay in cash.
Without question, with those kinds of returns on investment a new car pencils out too, but like most things in life, it is not what you make that matters but how much you spend. Keep the costs down on a 1700% ROI investment and you will reap incredible savings. The price to pay for that is driving around with an old car instead of one that is all shiny and new and has all kinds of new electronic gizmos.