This is exactly why an automobile should be treated as a depreciating asset, rather than an investment.
You fix a car if it will cost less than half of its value at the time of the repair. If it cost more than half, get rid of it at the first opportunity. There are caveats to that rule of course. So don't fault yourself for buying another car.
You had some bad luck and that is just a part of owning a car. In commiseration, I invested $2500 into an Acura TL that I dearly loved for timing belt and some other 100K maintenance items. Only to have its transmission blow up less than 4 months later. The $2500, plus the transmission replacement would have been well over half the value of the car. I traded it. For a car that I still own and absolutely loathe, but it's been reliable and I've put over 160,000 miles on it. My oldest kid now drives it.
The short answer is:
Keep your current car. It's basically new. From a manufacturer that is notable for the reliability of its products. You also know its maintenance history, which is incredibly important.
Have your payments kept ahead of depreciation? Meaning, can you sell your car for enough to pay off your loan? Just so you know, that's almost always "no", but your results may vary. You would also be forced to buy another car. 7.59% APR sucks, but are you able to get a better rate now on another car? Do you have the down payment for another car? Again, you may not have any money left over from selling your current car and paying off the lien.
If you can refinance it at a lower the rate, then absolutely that is the path you should take. If not, then taking a more global look at your finances are in order to make the payment more palatable.
That is a generally accepted rule for repairing a car. It is not hard and fast, as it is not a simple decision. So you are correct, it's not right, but it is also not wrong either. It's a matter of whose yacht you want to finance? Your mechanic's, or your lender's.
The only time I would consider putting more than half the worth of a car into fixing it, is if it is a vehicle that is difficult or impossible to replace. Case in point is I have a friend that has one of the last Toyota Camry's with a manual transmission to come off the production line. He bought it new. About 4 years ago at a bit over 200k on the odometer, he replaced the short block, plus a lot of other work to essentially make the car "new" again. His total bill was over $10k, which is more than the car is worth in total. Why? He just loves it that much and Toyota no longer offers a manual in the Camry. He hates automatics and has declared it will be a cold day in hell before he ever owns one.